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ICAN  RAILWAY 


OUTLINES 


OF 


AMERICAN  RAILWAY 
TRANSPORTATION 


BY 


RALPH   H.  HESS 
Associate  Professor  in   Political  Economy 

AXD 

HEISKELL  B.  WHALING 
Instructor   in    Political    Economy 


THE  UNIVERSITY  OF  WISCONSIN 


Copyright,  1915 
By   Ralph   H.   Hess 


CONTEXTS 


CHAP.                                                                                           PAGE 
I.  The  Functions   of  Railways 7 

II.  The  Public  Nature  of  the  Railway  Business 13 

III.  Foreign  Railway  Systems 19 

IV.  The  Development  of  American  Railways  before  1870     27 
V.  The  Growth  of  American  Railways  since  1879 33 

VI.  Railway    Competition   and   Cooperation 39 

VII.  Railway  Rate  Theories 49 

VIII.  Classification  and  Tariff  Structures 59 

IX.  Rate  Systems  in  the  East  and  South 73 

X.  Western.  Transcontinental,  and  Import  and  Export 

Rates 81 

XI.  The  Railway   Corporation 87 

XII.  Purposes  and  Methods  of  Railway  Regulation 103 

XIII.  Regulation  in  the  United  States  prior  to  1906 Ill 

XIV.  Railway  Regulation  since  1906 121 

XV.  Organization  of  the  Freight  and  Passenger  Serv- 
ices     129 

XVI.  The  Mail,  Parcel  Post,  and  Express  Services 139 

XVII.  The  Pullman  Service  and  Private  Car  Companies. .  153 

XVIII.  Electric  Railways  161 

XIX.  Some  Current  Railway  Problems 171 

Appendix.     List    of    selected    publications    forming    a 

comprehensive  reading  course  in  Railway 

Transportation   177 


325746 


INTRODUCTION 


A  comprehensive  study  of  transportation  would  include  a 
survey  of  the  transmission  of  goods,  persons,  and  ideas  by  means 
of  all  known  vehicles  cf  the  land,  water,  and  air. 

The  course  of  study  here  outlined  is  confined  to  an  examina- 
tion of  the  economic  and  social  aspects  of  the  transportation  of 
goods,  persons,  and  mails  upon  railways,  and  with  special  refer- 
ence to  conditions  in  the  United  States. 

In  this  study,  matters  of  first  importance  concern  the  relation 
of  the  railway  business  to  other  businesses  and  to  the  nation  as 
a  social  unit. 

The  theory  and  technique  of  railway  organization  and  man- 
agement, especially  as  regards  finances,  are  treated  in  certain 
general  aspects  as  are  also  some  phases  of  water  transportation. 

Certain  principles  which  are  here  developed  pertaining  to 
public  policy  in  matters  of  transportation  and  to  the  functions 
and  powers  of  railway  corporations  are  generally  significant  in 
the  wider  field  of  public  utility  enterprise.  Students  should  be 
careful  to  note  .and  offer  for  discussion  such  generalizations  as 
may  appear  to. apply  with  like  emphasis  in  the  consideration  of 
other  public  service  activities. 


For  the  sake  of  brevity,  references  to  the  following  books  are 
indicated  by  names  of  authors. 

Beale  and  Wyman,  Railroad  Rate  Regulation. 
Ooodnow,  Municipal  Government. 
Hadley,  Railroad  Transportation. 
Haines,  Railway  Corporations  as  Public  Servants. 
Haney,  Business  Organization. 
Johnson,  American  Railway  Transportation. 
Johnson  and  Huebner,  Railroad  Traffic  and  Rates. 
King,  Regulation  of  Municipal  Utilities. 

X,aSalle  Extension  University  Series,  Business  Organization,  Transpor- 
tation. 

McPherson,  Railroad  Freight  Rates. 
Meyer,  Railway  Legislation  in  the  United  States. 
Merritt,  Federal  Regulation  of  Railway  Rates. 
Morris,  Railroad  Administration. 
Noyes,  American  Railroad  Rates. 

Pratt,  Inland  Transportation  and  Communication  in  England. 
Raper,  Railway  Transportation. 
Ripley,  Railroads:  Rates  and  Regulation. 
Sakolski,  American  Railroad  Economics. 
Whitten,  Valuation  of  Public  Service  Corporations. 
Wood,  Modern  Business  Corporations. 


OUTLINES  OF  AMEKICAN  EAILWAY 
TRANSPORTATION 


CHAPTER  I 
THE  FUNCTIONS  OF  RAILWAYS 

(a)  Availability  is  an  essential  attribute  of  actual  value.  In 
broad  terms,  the  function  of  railways  is  the  creation  of  availa- 
bility or  '  *  place  utility. ' ' 

1.  The  bringing  together  of  labor,  capital,  and  natural  resources 

is  an  essential  preliminary  to  the  creation  of  "form  utili- 
ties" by  the  industrial  processes  of  agriculture  and  manufac- 
ture. 

Railways  have  been  the  chief  agency  in  promoting  the  settle- 
ment of  continental  interiors  and  geographical  specializa- 
tion in  production — (mutual  availability  of  the  economic 
factors  of  production). 

2.  Specialized  production   necessitates  the   exchange  of   goods 

among  districts  yielding  different  forms  of  natural  and 
labor  products. 

Ready  means  of  exchange  generates  competition  in  produc- 
tion among  districts  of  like  products. 

Railways  and  ocean  vessels  have  most  extensively  served 
mankind  in  this  respect — (availability  of  goods). 

3.  Social  intercourse,  an  essential  attribute  of  civilization  and 

a  criterion  of  progress,  has  been  many  times  multiplied  in 
the  last  half  century  by  railways — (social  availability). 

Pratt,  Inland  Transportation  and  Communication  in  Eng- 
land pp.  385-388,  397-399,  400.  Annals  American 
Academy,  Vol.  5,  pp.  905-908.  Meyer,  Railway  Legisla- 
tion in  the  United  States,  pp.  3-6.  Johnson,  American 
Railway  Transportation,  pp.  3-4.  Taussig,  Principles 
of  Economics,  Vol.  1,  pp.  43-^8.  McPherson,  Workings 
of  the  Railroads,  pp.  13-14. 


8  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  9 


(b)  The  development  of  markets  registered  the  first  concrete 
function  of  railways  in  Europe  and  America. 

1.  The  products  of  the  mine,  the  forest  and  the  farm  were  con- 

veyed to  manufacturing  and  commercial  centers. 

2.  The  carrying  of  raw  products  to  market  was  soon  supple- 

mented by  the  transmission  of  finished  products  from  "pri- 
mary markets"  to  local  distributing  points. 

Pratt,  pp.  386,  390.  Taussig,  Vol.  1,  pp.  41,  Vol.  2,  p.  363. 
Johnson,  p.  4.  Goodnow,  Municipal  Government,  Chap. 
2.  McPherson,  Railroad  Freight  Rates,  pp.  1-3,  45. 

(c)  The  exploitation  and  development  of  natural  resources, 
previously  remote  and  unappropriated,  followed  the  growth  of 
markets  and  easy  means  of  transport. 

The  exploitation  of  surface  prodiicts  is  generally  followed  by 
substantial  industrial  development  of  permanent  resources. 
Pratt,  p.  387.     Meyer,  pp.  30-34.     Haines,  Railway  Cor- 
porations as  Public  Servants,  pp.  29-31. 

(d)  A  rapid  diffusion  of  population  resulted  from  the  availa- 
bility of  industrial  opportunity  in  new  and  rich  districts  made 
accessible  by  railways. 

1.  Railways  tend  to  prevent  'social  saturation'  at  certain  points 

by  geographically  equalizing  population  and  industrial  op- 
portunity. 

2.  Certain  social  and  economic  forces  tend  to  inhibit  the  rational 

diffusion    of    population.      Railways    compete    with    these 
forces  in  certain  broad  aspects  of  social  control. 
3.  Human  reproduction  is   usually   quickened  by  the  relief  from 
economic  restrictions.     Railways  have  doubtless  made  pos- 
sible the  existence  of  larger  populations. 

Haines,  pp.  15-17.     Goodnow,  Chap.  2. 

(e)  The  diffusion  of  culture  and  intelligence  is  a  normal  con- 
comitant of  the  exchange  of  ideas  and  the  variety  of  experience 
and  observation  incident  to  specialized  production,  division  of 
labor,  and  interregional  trade. 

1.  The  intellectual  stimulus  of  industrial  and  commercial  com- 

petition is  a  primary  civilizing  agency. 

2.  The  accumulation  of  wealth  and  consequent  leisure,  coinci- 

dent with  economically  efficient  means  of  production,  may 
contribute  to  cultural  progress. 

Pratt,  pp.  396,  397,  404.    Johnson,  p.  7. 


10  _  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  11 

(f )  The  political  importance  of  railways  is  at  times  consider- 
able. 

1.  As  a  means  of  national  defense,  railways  make  military  forceq* 

quickly  available  upon  the  frontiers  and  at  points  of  insur- 
rection, and  afford  superior  commissary  and  hospital  trans- 
port. 

Railways  have  made  'civilized  warfare'  possible.     They  may 
have  contributed  to  the  cause  of  international  peace. 

2.  The  political  unity  of  great  areas  is  made  possible  by  railway 

intercourse. 

Permanent  nationality  necessarily  rests  upon  economic  and 
social  unity. 

Meyer,  pp.  5.    Haines,  pp.  33-34.    Pratt,  pp.  40. 

QUESTIONS 

1.  Explain  the  normal  effect  of  the  development  of  railways 

upon  the  efficiency  of  industry  (a)  in  a  new  country, 
(b)  in  a  densely  settled  country. 

2.  To  what  extent  may  railway  owners  share  in  the  increased 

industrial  product  resulting  from  improved  railway  fa- 
cilities ? 

3.  Discuss  the  probable  effect  of  railway  development  upon 

the  growth  and  distribution  of  population. 

4.  To  what  extent  and  in  what  ways  may  railway  develop- 

ment promote  cosmopolitanism? 


12  THE  UNIVERSITY  OF  WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION 


CHAPTER  T 
THE  PUBLIC  NATURE  OF  THE  RAILWAY  BUSINESS 

(a)  Certain  social  and  economic  needs  are  common  to  large 
groups  of  people.    When  such  needs  are  served  collectively,  the 
service  is  a  public  service,  and  a  public  interest  rests  on  the 
agency  through  which  the  service  is  rendered. 

(b)  Railways  render  public  service: 

1.  In  marketing  the  products  of  specialized  industries  which  might 

not  otherwise  exist. 

2.  In  conveying  supplies  to  aggregates  of  population  which  would 

perish  without  the  service. 

3.  In  disseminating  such  knowledge  and  in  developing  such  eco- 

nomic resources  as  are  necessary  to  human  progress. 

4.  In  transporting  persons  and  goods  in  response  to  general  eco- 

nomic, social,  and  political  needs. 
(See  Chapter  I.) 

Beale  and  Wyman,  Railroad  Rate  Regulation,  sec.  55,  66. 
King,  Regulation  of  Municipal  Utilities,  Chap.  1. 
Mnnn  v.  Illinois,  94  U.  S.  113,  La  SdUe,  pp.  10-19. 

(c)  Individuals  employed  in  a  public  service  are  following 
public  callings.    Corporations  rendering  public  service  are  pub- 
lic service  corporations.    Private  property  being  used  in  the  per- 
formance of  public  service  thereby  becomes  subject  to  a  public 
interest. 

1.  Individuals,  corporations,  and  property  employed  in  public  serv- 

ice are  subject  to  public  authority  in  the  performance  of  their 
public  functions  and  in  the  determination  of  compensation 
therefor. 

2.  Businesses  organized  for  the  purpose  of,  or  engaged  in,  supply- 

ing public  service  are  Quasi-public  businesses. 

Beale  and  Wyman.  sec.  1-5,  20,  28,  32,  41-42,  45,  48,  51,. 
.34-36.  61.  66-67. 


14  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  15 

(d)  Corporations  engaged  in  a  public  service  are  created  by 
public  authority  for  public  purposes,  and,  while  chiefly  private 
in  their  corporate  entity,  they  are  essentially  public  as  to  origin, 
function,  conduct,  and  tenure. 

Natural  persons  and  private  property  employed  by  corporate 
organizations  in  rendering  public  service  retain  certain  attributes 
of  privacy. 

The  following  constitutional  safe  guards  of  private  rights  per- 
tain to  quasi-public  business  as  elsewhere. 

1.  Equal  protection  of  the  laic. 

2.  Due  process  of  laic. 

3.  Just  compensation. 

4.  Validity  of  contracts. 

5.  Exemption  from  self-incrimination. 

6.  Judicial  review. 

Beale  and  Wyman,  sec.  1331-1335.  Yale  Review,  Vol.  16, 
pp.  361-366.  Whitten,  Valuation  of  Public  Service 
Corporations,  p.  2.  Fourteenth  and  Fifth  amendments 
to  the  Federal  Constitution  and  similar  clauses  in  state 
constitutions.  Independent,  Vol.  64,  pp.  834-8. 

(e)  The  public  interest  in  quasi-public  business  extends  to 
the  exercise  of  public  authority  in  securing  the  following : 

1.  Adequate  and  continuous  service  without  discrimination. 

2.  Rates,  reasonable  in  amount  and  nondiscriminatory. 

3.  Safety,  health,  and  moral  protection  of  patrons  and  employes. 

4.  Promotion  of  general  welfare. 

Beale  and  Wyman,  sec.  1.  King,  pp.  4-10.  Cleveland  and 
Powell,  Railroad  Finance,  pp.  153-155. 

(f)  The  legal  concept  of  a, 'public  business'  is  based  upon  the 
economic  characteristics  of  the  business,  but  requires  validation 
by  law. 

1.  Legislative  act. 

2.  Judicial  recognition. 

Munn  v.  Illinois,  94  U.  S.  113. 

QUESTIONS 

1.  Formulate  a  comprehensive  definition  of  a  public. 

2.  In  what  ways  are  railways  and  the  public  mutually  inter- 

dependent? 


16  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  17 

3.  What  elements  of  private  monopoly  appear  to  be  inherent 

in  unregulated  railroad  business? 

4.  If  a  railway  system  were  permitted  to  advance  its  rates  to 

the  extreme  of  monopoly  price,  what  effects  would  fol- 
low— 

a.  in  the  cost  of  living  ? 

b.  in  the  distribution  of 'wealth? 

c.  in  the  development  of  industry? 

d.  in  the  welfare  and  growth  of  population? 

5.  What  is  meant    by  the   police  power  f    What  is  the  re- 

lation of  the  police  power  to  the  public  control  of  rail- 
ways? 


THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  19 


CHAPTER  III 
FOREIGN  RAILWAY  SYSTEMS 

(a)  Tansportation  systems  are  shaped  by  the  physical,  eco- 
nomic, social,  political,  and  psychological  characteristics  of  na- 
tions. 

1.  The  determinant  physical  factors  are  size  of  country,   topog- 

raphy, resources,  and  climate. 

2.  The  economic  and  social  forces  are  status  of  industrial  civiliza- 

tion, cultural  influences,  economic  well-being  of  people,  inter- 
national relations  and  trade,  business  habits,  and  density  of 
population  and  its  distribution. 

3.  Political  influences  are  social  solidarity,  governmental  theory 

of  transportation,  military  needs  and  practical  politics. 

4.  From  the  psychological  point  of  view,  national  temperament  is 

significant  in  organization  and  administration.  (Hadley,  pp. 
152,  187,  189-190). 

Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  1, 
Chap.  1.  Hadley,  Railroad  Transportation,  pp.  14, 
205.  Raper,  Railway  Transportation,  pp.  165. 

(b)  In  comparison  with  European  systems  of  transportation, 
the  American  system  is  notable  for  its  transcendent  size,  rapid- 
ity, of  growth,  capacity   of  equipment,  and  its   relatively  unde- 
veloped passenger  service. 

1.  Mileage  statistics.     (1911) 

Number  of  Miles  of  railway  Miles  of  railway 

Country                    miles  of  per  100  sq.  mi.  per  10,000 

railway                        of  territory  population 

U.    S.                        246,602                         6.9     '  26,8 

Great  Britain  23,394  19.3  5.2 

France  31,313  15.0  8.0 

Germany  38,485  18.3  5.9 

Italy  10,705  9.7  3.1 

Austria  27,850  10.6  5.5 

Europe  210,526  5.6  4.8 


THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  21 

2.  The  Freight  Service — 


Country 

Tonnage       » 

Ton  miles 

Average  length 
of  haul 

Average 
train  load 

U.  S. 

1 

1 

1 

1 

Britain 

1/2 

1/6 

1/6  to  1/5 

1/4  to  1/3 

France 

1/6  to  1/5 

1/20 

1/3 

1/4  to  1/3 

Germany 

1/2 

1/9 

1/3 

1/4  to  1/3 

U.  S.  253,784,000,000  ton  miles. 
254  miles  average  haul. 
352  tons  average  train  load. 
Figures  all  based  on  U.  S.  as  1. 

Country  Average  size  of  cars 

U.  S.  30  to  50  tons  20  tons  is  smallest 

Great  Britain  10  to  15  tons  20  tons  is  largest 

France  10  to  15  tons  20  tons  is  largest 

Germany  10  to  15  tons  20  tons  is  largest 

Motive  power,  bridges,  and  rails  are  respectively  more  powerful, 
stronger  and  heavier  in  the  United  States. 
3.  The  Passenger  Service — 


Number  of  trips 

Passenger  miles 

Average  distance 

Country 

per  capita 

per  capita 

traveled 

U.  S. 

6.9 

220 

33 

Great  Britain 

27.0 

245 

9 

France 

10.0 

165 

16 

Germany 

12.0 

175 

15 

PASSENGERS  TRAVELING  IN   VARIOUS  CLASSES    (PERCENTAGES) 


Country 
U.   S. 

Extra 

class 

2 

First 
class 
98.00 

Second 
class 

Third 
class 

Fourth 
class 

Britain 

3.04 

4.38 

92.58 

France 

4.41 

24.69 

70.90 

Germany 

.35 

9.00 

55.72 

34.  < 

In  the  United  States  there  is  some  second  class  travel,  but  the 
percentage  is  unknown.     It  is  not  very  large. 
4.  Relative  importance  of  freight  and  passenger  services — 

Percentage  of  earnings  from 
Country  Freight  Passenger 

U.  S.  69.04  23.57 

Great  Britain  49.69  42.90 

France  53.60  44.70 

Germany  64.63  28.17 

Johnson  and  Huebner,  Vol.  1.  Chap.  1.    Hadley,  pp.  146-149. 
Raper,  pp.  63. 

(c)  Continental    rates    are    characterized    by    mathematical 
scales  based  on  distance  in  contrast  with  English  and  American 


THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  23 

'  individual '  rates  based  on  traffic  conditions : — a  contrast  which 
results  from  the  different  degrees  of  public  and  private  interest 
recognized  in  rate  making. 

1.  Rates  on  the  continent  do  not  possess  the  same  degree  of  elas- 

ticity as  American  and  English  rates. 

2.  No  definite  conclusions  can  be  drawn  as  to  the  relativity  of 

rates  on  account  of  the  different  conditions  under  which  sys- 
tems operate  and  the  difference  in  the  services  rendered. 
In  general,  freight  rates  in  America  are  lower  than  freight  rates 

in  Europe,  and  passenger  fares  higher. 

Ripley,  155.  Columbia  Studies,  Vol.  37,  pp.  13-15.  John- 
son, pp.  293-304.  Noyes,  American  Railroad  Rates, 
Chap.  8.  Merritt,  Federal  Regulation  of  Railway 
Rates,  pp.  1-5. 

(d)  Private  enterprise  subject  to  government  supervision 
characterizes  the  railway  policy  of  England,  France  and  the 
United  States;  state  operation  prevails  in  Germany,  Austria 
and  Italy. 

1.  In    England,   private  enterprise   in   railway  matters   finds  its 

fullest  expression. 

The  machinery  of  supervision  includes  Parliament,  the  courts, 
the  Railway  and  Canal  Commission,  and  the  Board  of  Trade. 

Parliament  promulgates  the  regulative  principles. 

The  Railway  and  Canal  Commission,  with  jurisdiction  over 
'undue  preference',  traffic  facilities,  legality  of  rates,  through 
rates,  and  appeals  from  the  Board  of  Trade,  exercises  judi- 
cial functions. 

The  powers  of  the  Board  of  Trade  are  advisory. 

Johnson,  pp.  322-330.     Raper,  pp.  45-59.     Ripley,  Problems, 
pp.  774,  795-800. 

2.  In  France,  government  supervision  amounts  almost  to  govern- 

ment management. 

The  law  of  1842  outlined  the  basis  of  the  French  railway  system 
practically  as  it  exists  today. 

Territorial  monopoly  by  state  authorization  and  public  owner- 
ship of  rights  of  way  are  unique  features  in  government 
policy. 

Because  of  political  and  financial  situations,  France  has  as- 
sumed control  of  18  per  cent  of  her  railways. 

The  machinery  of  supervision  involves — 

Directors  of  Control — bodies  of  experts  whose  functions  are  to 
gather  information. 

Advisory  Councils  composed  of  state  officials  and  representa- 
tives of  industry,  agriculture,  and  commerce  whose  functions 
are  to  harmonize  conflicting  interests  in  transport. 


24  THE   UNIVERSITY   OP   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  25 

The  Ministry  of  Public  Works — an  administrative  body  with 
large  powers  over  finance,  construction,  operation,  and  rates. 
Johnson,    pp.    330-334.        Raper,   pp.    61-65,    78,    95-100. 
Ripley,  Problems,  pp.  800-806. 

3.  In  Germany  the  states  own  92  per  cent  of  the  railways. 

The  Imperial  government  exercises  a  nominal  control  over  rail- 
ways; vital  control  vests  in  the  various  states. 

The  machinery  of  control  embraces — 

The  Ministry  of  Public  Works — an  administrative  body  with 
general  supervisory  power. 

Advisory  Councils,  representing  various  state  and  economic  in- 
terests, which  seek  to  bring  about  a  clear  understanding  of 
different  points  of  view. 

Directorates  of  Operation  whose  functions  are  maintenance  of 
plant  and  movement  of  traffic. 

Extra  legal  bodies,  such  as  the  General  Conference,  the  Tariff 
Commission  and  the  Traders  Committee,  the  Railway  Traffic 
Association,  and  the  Association  of  Railway  Managers,  which 
deal  with  such  matters  as  interchange  of  traffic  and  uniform 
classification. 
Johnson,  pp.  337-344.  Raper,  pp.  134-143,  166-76. 

4.  Italian  policy  has  vacillated  all  the  way  from  private  manage- 

ment, through  intermediate  steps,  to  government  control. 

The  machinery  of  control  involves — 

The  Ministry  of  Public  Works  with  general  supervisory  power. 

The  Department  of  State  Railways  in  whose  hands  is  the  ac- 
tual administration  of  the  railways. 

Advisory  Councils  with  the  same  functions  as  those  in  France 
and  Germany. 

Johnson,  pp.  335-337.      Raper,  pp.  102-120,  129-133. 
Johnson,  pp.  346-347.     Columbia  Studies,  Vol.  37,  pp.  13. 

QUESTIONS 

1.  "What  have  been  the  dominant  factors  shaping  the  public 

policy  of  the  various  governments?     See  Johnson,  pp. 
346-8. 

2.  "What  factors  are  most  significant  in  explaining 

a.  mileage? 

b.  tonnage? 

c.  length  of  haul? 

d.  size  of  cars? 

e.  train  loads  ? 

f.  passenger  development? 


26  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  27 


CHAPTER  IV 

THE  DEVELOPMENT   OF   AMERICAN  RAILWAYS 
BEFORE  1870 

<(a)  Antecedents  of  the  railways. 

1.  River  boats  in  the  East  and  South  became  efficient  about  1817. 

2.  Post  roads  and  turn-pikes  were  most  extensively  constructed 

in  New  England  and  Pennsylvania. 

Eastern  points  were  connected  by  post  roads  with  Charleston, 
Savannah,  Nashville,  New  Orleans,  and  St.  Louis. 

The  pack-train,  the  prairie  schooner,  the  coach,  and  the  pony  ex- 
press preceded  the  railways  in  the  far  West. 

The  National  Pike  was  constructed  from  Cumberland,  Mary- 
land (1805),  to  Vandalia,  Illinois  (1835),  at  a  cost  of 
$8,500,000. 

3.  Three  classes  of  canals  were  projected.     Some  projects  were 

completed  in  early  days,  and  others  have  recently  been  re- 
vived. 

A  coastal  system  of  canals  was  proposed  by  which  the  indenta- 
tions of  the  Atlantic  from  Cape  Cod  Bay  to  Pamlico  Sound 
would  be  articulated. 

Canals  were  proposed  to  connect  the  natural  waterways  of 
the  Atlantic  slope  with  the  lakes  and  rivers  of  the  interior. 

A  network  of  canals  was  designed  to  articulate  the  rivers 
of  the  interior' and  finally  to  connect  them  with  the  Atlantic, 
the  Gulf,  and  the  Great  Lakes. 

Ripley,  pp.  1-7.  Johnson,  pp.  13-18.  Cleveland  and  Pow- 
ell, Railroad  Promotion  and  Capitalization,  pp.  1-16 
and  27-45. 

(b)   The  period  from  1825  to  1840  was  a  time  of  railway  ex- 
perimentation. 

1.  The  Liverpool  and  Manchester  and  the  Stockton  and  Darlington 
Railways  were  in  successful  operation  in  England  before  1830. 

In  America,  the  Baltimore  and  Ohio  and  the  Charleston  and 
Hamburg  were  in  operation  soon  after  1830. 

The  Rainhill  trial,  October  10,  1829,  demonstrated  the  efficiency 
of  the  steam  locomotive. 


THE   UNIVERSITY   OF   WISCONSIN 

fe. 


AMERICAN    RAILWAY    TRANSPORTATION  29 

2.  Economic  conditions  determined  the  nature  and  success  of  rail- 

way construction. 

Dense  population  and  established  industries  in  the  East. 

Needed  means  of  transport  in  the   South  for  marketing  spe- 
cialized crops  and  securing  supplies. 

A  period  of  exploitation  and  development  in  the  West. 
Conditions  were  generally  less  favorable  to  early  railway  de- 
velopment in  America  than  in  England. 

3.  Obstacles  to  railway  construction  occasioned  much  delay. 
Opposition  of  turn-pike  and  coach  companies. 
Skepticism  of  engineers  and  capitalists. 

4.  Early  railway  construction  (1840). 

Eastern  and  southern  roads  were  successful  from  the  start  and 

were  well  under  way  by  1840. 
Railroads  west  of  the  Alleghanies  were  still  in  an  experimental 

stage. 

Two  charters  were  granted  in  Wisconsin  in  1836.  Construc- 
tion began  in  1851. 

Ripley,  pp.  7-11.  Johnson,  pp.  18-23.  Cleveland  and 
Powell,  Railroad  Promotion  &  Capitalization,  pp.  46- 
54?  57-66,  73. 

(c)  The  decade  from  1840  to  1850  was  the  initial  period  of 
successful  railway  operation  in  the  United  States. 

1.  The  mechanical  development  of  the  locomotive  and  track. 

2.  The  repeal  of  the  tariff  on  iron  rails  in  1843. 

3.  The  extension  of  eastern  lines  into  the  middle  states. 

4.  Financial  difficulties  and  the  depression  of  1857. 
Ripley,  pp.  11-15.    Johnson,  pp.  25,  43-44. 

(d)  The  period  1850  to  1870  witnessed  the  development  of 
through  traffic  and  the  beginnings  of  the  great  railway  systems' 
of  the  present  day. 

1.  The  land  grant  policy  afforded  a  new  means  of  railway  finance. 

2.  The  consolidation  of  eastern  companies,  undertaken  by  such 

men  as  Vanderbilt  and  Scott,  resulted  in  the  articulation  of 
independent  roads  into  "through  lines". 

3.  The  standardization  of  gauge  and  the  articulation  of  schedules 

made  through  traffic  possible. 

Railways  connected  the  East  with  Chicago  in  1853. 

Rails  were  laid  to  the  Mississippi  River  by  1854,  and  to  the 
Missouri  by  1858. 

A  railroad  was  built  across  the  Isthmus  from  Colon  to  Pan- 
ama in  1855. 


30  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  31 

The    Union    Pacific-Central    Pacific   line    reached   the   western 

coast  in  1869. 

4.  The  beginning  of  competition  soon  after  the  war  marks  the  in- 
troduction of  the  economic  and  political  problems  which  have 
been  associated  with  the  development  of  transportation  since 
1870: 

Rail  and  water  competition. 
Competition  between  parallel  rail  lines. 
Rivalry  among  producing  districts. 
Rivalry  among  distributing  centers. 
Ripley,  pp.  15-18,  35-43.     Johnson,  pp.  25-28,  308-321. 

Questions 

1.  What  influence,  if  any,  did  the  promotion  of  railways  in 

the  United  States  have  in  precipitating  financial  crises 
prior  to  1870  ? 

In  wrhat   way   was  railway  development  associated 
with  the  crisis  of  1873  ? 

2.  In  what  ways  were  the  railways  and  waterways  mutually 

complementary  prior  to   1870?     In   what   ways   were 
they  competitive? 

3.  In  what  ways  did  the  discovery  of  gold  in  California  pro- 

mote railway  construction  ? 

4.  Were  the  reports  of  explorations  in  the  West  by  Pike,  Long,. 

and  Freemont  such  as  to  promote  or  encourage  railway 
construction  ? 


32  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  .33 


CHAPTER  V 
THE  GROWTH  OF  AMERICAN  RAILWAYS  SINCE  1870 

(a)  The  decade  1870  to  1880  is  characterized  by  spectacular 
railway  finance,  by  the  development  of  both  competition  and 
cooperation  among  railway  companies,  by  the  permanent  lower- 
ing of  railway  rates,  by  the  decline  of  canal  and  river  traffic, 
and  by  the  rapid  industrial  development  of  the  interior  and 
the  West. 

1.  The  rapid  railway  construction  in  1869  to  1872  led  to  financial 

trouble  and  contributed  to  the  crisis  of  1873. 
Such  financial  pirates  as  Jay  Gould  and  Jim  Fiske  became  ac- 
tive in  railway  affairs. 

2.  Competition  between  the  first  trunk  lines  of  the  New  York 

Central  and  the  Pennsylvania  companies  began  in  1869.     By 
1874,  the  Baltimore  and  Ohio  and  the  Grand  Trunk  were  in- 
volved. 
Competition  led  to  cooperation,  discrimination,  and  regulation. 

3.  A  decline  in  ocean  traffic  between  the  east  and  west  coasts  began 

in  1870. 

Traffic  on  the  Erie  Canal  declined  after  1880. 
Mississippi  River  traffic  reached  its  maximum  in  1879. 

4.  Low  rates  and  the  westward  drift  of  population  stimulated  ag- 

ricultural production  and  foreign  trade  in  grain  and  meat. 
Ripley,  pp.  18-27,    431-432.     Ripley,  Problems,    Chap.  1. 
La  SaUe,  pp.  31-32. 

(b)  The  period  1880  to  1890  experienced  the  most  rapid  rail- 
road building  in  history.     Speculation  and  fraud  in  railway 
construction  and  finance  were  at  high.  tide.     Railway  competi- 
tion and  associated  phenomena  became  dangerously  destructive 
to  business  and  induced  federal  regulation. 

1.  Railway  construction  included  the  building  of  through  lines  in- 
to the  South  and  West,  and  of  cross-lines  and  parallel  routes 
in  the  trunk-line  district  11,569  miles  were  built  in  1883, 
and  12,983  miles  in  1887. 

3 


34  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  35 

2.  Speculation  and  fraud  resulted  in  a  "railway  panic"  in  1884. 

3.  Development  of  transportation  facilities  resulted  in  significant 

changes  in  the  relative  importance  of  cities: 

4.  Public  aid  was  withdrawn  from  railways  after  the  following 

contributions  had  been  made: 

Federal  aid  $178,600,000  26,000,000  acres 

State  aid  228,500,000  129,000,000  acres 

Municipal  and  local         300,000,000 


$707,100,000  155,000,000  acres 

5.  The  Cullom  Report  on  pooling  and  discrimination  was  followed 

by  the  Interstate  Commerce  Act  of  1887. 
Ripley,  pp.  27-34,  35-42. 

(c)  Since  1890,  the  physical  growth  of  railways  in  the  United 
States  has  been  steady  and  relatively  rapid ;  regulation  of  rates 
and  services  both  state  and  federal  has  increased  in  effectiveness, 
and  the  centralization  of  corporate  organization  and  the  exten- 
sion of  intercorporate  relations  have  advanced. 

1.  The  United  States  has  about  40  per  cent  of  the  total  railway 

mileage  of  the  world,  and  six  times  the  per  capita  railway 
equipment  of  Europe. 

2.  Regulative  measures  include — 

The  Sherman  Law  decision  of  1897      (Trans-Missouri  Freight 

Case). 

The  Elkins  Act  of  1903. 
The  Hepburn  Act  of  1906. 
The  Mann-Elkins  Act  of  1910. 
Provisions  for  physical  valuation,  1912. 
Panama  Canal  Act.  1912.  . 

3.  Methods  of  consolidation  and  centralization  include — 

Amalgamation. 
Merger. 

Holding  companies. 

Interlocking  directorates  and  voting  trusts. 
Ripley,  pp.  34-35,  42.    Johnson,  pp.  52-67,  28-33. 

(d)  Mechanical  improvements — 

In  track. 
In  equipment. 
In  terminal  facilities. 
In  safety. 
Johnson,  pp.  34-51.    Ripley,  pp.  93-95. 


36  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  37 

(e)  Improved  efficiency  in  organization — 

1.  The  economies  of  large  scale  production. 

2.  The  reduction  of  freight  claims. 

3.  The  introduction  of  scientific  management. 

4.  The  increased  responsibility  of  directors. 

Ripley,  pp.  71-100,  524-525.  Noyes,  pp.  169-177.  Morris, 
Railroad  Administration,  pp.  71-75.  Cleveland  & 
Powell,  Railroad  Finance,  p.  161. 

(f)  Rate  modifications — 

1.  The  alleviation  of  undue  discrimination. 

2.  General  reduction  of  freight  rates,  1890-1900. 

3.  Legislative  reduction  of  passenger  rates. 

4.  The  movement  for  higher  freight  rates,  1910  to  present. 

5.  The  reduction  and  standardization  of  express  rates. 

6.  Introduction  of  the  parcel  post. 

(See  chapters  XIV,  XVI). 

QUESTIONS 

1.  To  what  extent  does  public  aid  to  railway  construction  seem 

to  justify  a  public  interest  in  the  transportation  busi- 
ness and  the  official  regulation  of  rates  and  services? 

2.  Explain  the  relation  between  railway  development  in  the 

United  States  and  the  growth  of  foreign  trade. 

3.  "What  relation,  if  any,  exists  between  the  development  of 

railways  and  the  decline  of  the  American  merchant 
marine  ? 

4.  Does  centralization  of  railway  control,  in  itself,  constitute 

a  cause  for  more  effective  public  regulation?     "Why? 


38  THE   UNIVERSITY   OP   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION 


CHAPTER  VI 
RAILWAY  COMPETITION  AND  CO-OPERATION 

(a)  Early  American  experience  has  demonstrated  that  rail- 
way competition  is  mutually  destructive  to  the  competing  com- 
panies and  to  the  public  interests  involved,  and  that  when  co- 
operation or  combination  is  possible  competition  is  not  feasible. 

1.  Competition  in  New  England  and  the  eastern  states  resulted 

in  some  agreements  to  maintain  rates  as  early  as  1860. 

2.  Rate  wars  among  roads  entering  Chicago  in  1869-1874  resulted 

in  a  general  movement  toward  railway  cooperation. 

3.  The  failure  of  the  Saratoga  conference  to  effect  a  cooperative 

arrangement  among  the  roads  of  the  trunk-line  territory  pre- 
cipitated the  rate  wars  of  1875-1876  which  clearly  revealed 
the  destructive  results  of  unregulated  competition  and  the 
absence  of  cooperation.  (La  Salle,  pp.  345-346) 

4.  The  intermittent  rate  wars  of  the  eighties  accelerated  coopera- 

tion and  consolidation,  and  likewise  hastened  the  develop- 
ment of  state  and  federal  regulation  of  railways. 
Johnson,  pp.  213-221,  225-227,  235.    Johnson  &  Huebner, 
Vol.  1,  pp.  288,  291,  293.    Ripley,  pp.  444-447. 

(b)  The  causes  of  railway  competition  are: 

1.  Rivalry  between  transportation  routes. 

2.  Industrial  rivalry  among  production  districts  and  among  large 

producers. 

The  effect  of  rates  on  conditions  of  competition  among  the  in- 
dustries served  is  the  most  vital  factor  in  railway  competi- 
tion. 

3.  Rivalry  among  markets. 

4.  Political  and  social  rivalry. 

Johnson,  pp.  264-270.  Johnson  &  Huebner,  Vol.  1,  pp. 
354-358.  Ripley,  pp.  124-127,  118-119.  Sakolski,  pp. 
10-12. 


40  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  41 

(c)  The  direct  results  of  competition  are  lower  rates,  discrim- 
ination, cooperative  agreements,  consolidation,  and  regulation. 

1.  "Cut  rates"  in  themselves  are  only  temporary;  but  the  inaugura- 

tion of  peace  after  rate  wars  has  generally  placed  rates  on  a 
lower  level  than  formerly  prevailed. 

2.  Personal   discrimination  is  inequality  of  treatment  as  among 

shippers  in  the  nature  of  rebates  or  special  service,  and  is 
generally  carried  on  in  secret. 

Forms  of  rebating  include  underbilling,  underclassification,  com- 
missions, favorable  adjustment  of  claims,  and  "evening  tar- 
iffs". 

Discriminatory  services  include  free  services,  special  contract- 
ual privileges  to  private  car  companies  and  to  terminal  and 
tap-lines,,  unfair  distribution  of  cars,  and  special  favors  in 
outside  transactions  and  credit  arrangements. 

3.  Local  discrimination  is  denned  by  Ripley  as  "any  unreasonable 

departure  from  a  tariff  graded  in  some  proportion  according 
to  distance". 

Traffic  centers  have  generally  taken  lower  rates  than  points  in 
non-competitive  territory.  This  constitutes  local  discrimina- 
tion in  affording  lower  long-haul  rates  to  "competitive  terri- 
tory". 

Johnson,  pp.  250-257,  263.  Tale  Review,  vol.  16,  p.  81. 
Ripley,  pp.  23,  114-115,  185,  186,  189-218,  233,  252- 
254.  McPherson,  pp.  165-173,  207-210,  La  SaUe,  pp. 
l-9;  63-79. 

(d)  Present  day  competition  is  mainly  between  widely  di- 
vergent routes  and  for  through  traffic. 

1.  Trunk-lines  are   in   competition   with   lines  to  the  north  and 

south. 

2.  Trans-continental  competition  is  effective  as  among  northern, 

middle,  and  southern  lines. 

3.  Competition  between  rail  routes,  rail-and-water  routes,  and  all 

water  routes  is  effective. 

4.  There  is  some  local  competition  between  steam  lines  and  elec- 

tric lines. 

Johnson  &  Huebner,  Vo.  1,  pp.  356,  450-451,  456,  493- 
494,  Vol.  2,  pp.  237,  254.  Ripley,  pp.  396,  400-401, 
433,  437-438. 

(e)  Railway  cooperation  may  promote  the  quality  and  effi- 
ciency of  the  service. 

1.  Through  service  and  joint  traffic  agreements. 


42  THE   UNIVERSITY   OF  WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  43 

2.  Union  stations  and  belt-line  service. 

3.  Demurrage  bureaus  and  railway  clearing  houses. 

Johnson  &  Huebner,  Vol.  1,  pp.  181,  190,  199,  203,  288, 
306. 

(f)  Railway  cooperative  agreements  may  be  primarily  per- 
cuniary  in  purpose. 

1.  Agreements  to  maintain  rates. 

2.  Money  pools. 

3.  Traffic  pools. 

4.  The  division  of  territory. 

Johnson  &  Huebner,  Vol.  1,  pp.  291-292.  Johnson,  pp. 
224,  229-238.  La  Salle,  pp.  347-351. 

(g)  The  historically  alleged  benefits  of  competition  in  trade 
do  not  apply  to  the  railroad  business  because  of — 

1.  The  fixity  of  railroad  capital. 

2.  The  necessity  of  continuous  service. 

3.  The  operation  of  the  law  of  decreasing  cost. 
Consequently,  transportation  is  characteristically  a  monopolis- 
tic business  and  properly  subject  to  government  regulation. 

Johnson,  pp.  221-224,  163.  Ripley,  pp.  71-77,  165.  Cleve- 
land &  Powell,  Railroad  Finance,  pp.  154,  227-229. 
La  Salle,  pp.  9-10. 

(h)   The  progress  of  railway  cooperation  has  been  interferred 
with  by  state  and  federal  legislation  and  by  the  courts. 

1.  Pools  and  discrimination  were  made  unlawful  by  the  Inter- 

state Commerce  law  of  1887. 

State  laws  were  directed  against  these  forms  of  railway  coop- 
eration much  earlier. 

2.  Agreements  to  maintain  rates  were  declared  to  be  in  violation  of 

the  anti-trust  law  of  1890  by  the  Trans-Missouri  "Freight  deci- 
sion of  1897  and  by  the  Joint  Traffic  decision  of  1898. 

3.  Personal  discrimination  was  made  more  difficult  by  the  Elkins 

law  of  1903.     (See  Chap.  XIII.) 

4.  Later  laws  and  decisions  have  reinforced  and  extended  the  reg- 

ulative measures  mentioned  above.     (Chaps.  XIII  &  XIV.) 

5.  Legislative  measures  directed  against  cooperation  have  been  in 


44  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  45 

large  measure  ineffective  because  based  upon  the  fallacious 
doctrine  that  "competition  is  the  life  of  trade". 

Johnson,  pp.  239-247.    Johnson   &  Huebner,   Vol.  1,  pp. 

300-301.  Kipley,  pp.  205,  452,  492-493.     Morris,  pp. 

257-278.  Cleveland  &  Powell,  Railroad  Finance,  pp. 

277-279.  La  Salle,  pp.  351-356. 

(i)  Extra-legal  railway  associations  now  accomplish  the  re- 
sults formerly  secured  by  cooperative  organizations  which  have 
been  forbidden  to  exist. 

1.  There  are  three  classification  committees. 

2.  There  are  four  general  types  of  freight  and  passenger  traffic 

associations — 
Associations    dealing    with    service    and    rates    pertaining    to 

through  traffic  over  large  areas. 
State  traffic  associations. 
Local  (municipal)  traffic  associations. 
Associations  which  deal  with  specialized  traffic. 

3.  Railway  presidents,  traffic  officials,  and  operation  officials  enter 

into  cooperative  arrangements  through  their  respective  na- 
tional and  district  associations. 

These  arrangements  take  the  form  of  "gentlemen's  agreements" 
and  mutual  understandings. 

Johnson,  pp.  247-250.  Johnson  &  Huebner,  Vol.  1,  pp. 
303-305,  333,  306,  313,  Vol.  2,  p.  167.  La  Salle,  pp. 
356-362. 

EXERCISE 

Construct  an  outline  map  of  North  America  showing  the  ap- 
proximate routes  of  the  main  lines  of  the  following  railway  sys- 
tems. Indicate  the  approximate  date  of  the  completion  of  each 
through  line  and  locate  the  principal  cities  on  each  route.  In- 
dicate the  three  or  four  chief  products  of  each  geographical  di- 
vision of  the  country  which  contributes  to  railway  traffic. 

The  New  York  Central  lines. 

The  Pennsylvania  Lines. 

The  Boston  &  Maine. 

The  New  York,  New  Haven  &  Hartford. 

The  Baltimore  &  Ohio. 


46  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  47 

The  Norfolk  and  Western. 

The  Southern. 

The  Atlantic  Coast  Line. 

The  Illinois  Central. 

The  Chicago,  Burlington  &  Quincy. 

The  Minneapolis  &  St.  Louis. 

The  Union  Pacific  Route.    ^ 

The  Southern  Pacific,    i, 

The  Atchinson,  Topeka  &  Santa  Fe. 

St.  Louis,  Iron  Mountain  &  Southern. 

International  &  Great  Northern. 

The  Texas  &  Pacific. 

The  Northern  Pacific.  v 

The  Great  Northern. 

The  Chicago,  Milwaukee  &  St.  Paul  (Puget  Sound). 

The  Grand  Trunk  and  Grand  Trunk  Pacific. 

The  Canadian  Pacific. 

The  Canadian  Northern. 

The  Mexican  Central. 

The  Mexican  National. 

See  historical  sketch  and  map  of  respective  roads  in  Poor's 
Manual,  current  railroad  folders,  articles  on  Railway  Systems 
of  America  in  Moody 's  Magazine.  Johnson  &  Huebner  Vol.  1, 
Chap.  2. 


48  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  49 


CHAPTER  VII 
RAILWAY  RATE  THEORIES 

(a)  Railway  rates  are  the  prices  of  railway  services,  and 
economic  principles  which  pertain  to  rate  making  are  necessarily 
analogous  to  price  theories. 

1.  Price  theories  are  generally  reduceable  to  two  criteria  as  to 

the  amount  of  the  charge,  i.  e.  the  cost-of-production  princi- 
ple and  the  monopoly  principle. 

2.  The  cost-of-production  principle  establishes  a  price  sufficient  to 

compensate  necessary  expenditures  for  materials,  labor,  in- 
terest, rent,  and  fair  profits  involved  in  the  production  of 
goods  or  service. 

Under  this  theory,  the  average  unit  cost  is  the  primary  price 
criterion. 

In  certain  instances  the  direct  cost  of  specific  units  may  be  used. 

3.  The   application    of   the   monopoly  principle   indicates    an   ar- 

bitrary fixing  of  prices,  in  the  absence  of  competition  or  regu- 
lation, as  high  as  is  consistent  with  the  largest  net  income 
to  the  business. 
(See  Theory  of  Prices  in  any  modern  text.) 

Ely,  Outlines,  pp.  170-172,  187,  197-199. 

(b)  The'  cost-of-tke-seri'ice  theory  of  railway  rates  is  analo- 
gous to  the  cost-of -production  theory  of  prices,  and  assumes  that 
reasonable  rates  should  be   primarily  commensurate  with  the 
average   unit   costs   of   supplying   the   various   classes    of   the 
railway  service. 

1.  This  theory  is  practicable  only  when  the  approximate  average 

cost  per  unit  of  significant  classes  of  the  service  may  be  as- 
certained by  methods  of  accounting  and  statistics. 

2.  The  following  cost  factors  are  essential  to  the  determination  of 


50  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  51 

the  total  cost  of  the  service  which  constitutes  the  basis  of 
reasonableness  as  to  the  gross  revenue  of  the  business — 
Maintenance  of  way  and  equipment. 
Conducting  transportation. 
Traffic  expenses. 
General  expenses. 

Interest  (fixed  charges  and  dividends). 

The  first  four  factors  are  determined  by  accounting  methods, 
and  the  latter  (interest)  is  calculated  upon  a  "fair  valuation"  of 
property  "used  and  useful"  in  supplying  the  service,  and  a  "rea- 
sonable return"  upon  such  valuation  as  an  investment. 

3.  Methods  of  valuation  take  account  of  tangible  property  and,  in 

varying  .degree,  of  intangible  property  elements. 
Different  schemes  of  valuation  are  designated  as  follqws — 

Cost  value  (historical  method). 

Cost  of  reproduction  value   (hypothetical  method). 

Commercial  value  (stock-and-bond  method). 

4.  The  chief  problem  in  applying  the  cost-of-the-service  theory  is 

the  allocation  of  gross  expenses  to  different  branches  of  the 
service  and  to  the  different  classes  of  traffic. 

Certain  expenditures  are  directly  assignable  to  definite  classes 
or  branches  of  the  service. 

A  second  class  of  expenditures  is  subject  to  apportionment  on 
the  basis  of  proportionate  joint  interests. 

The  residuum  of  extraneous  and  overhead  expenses  may  be  sta- 
tistically apportioned  upon  a  basis  of  relativity  to  certain  elements 
of  the  service  or  prorated  upon  the  basis  of  otherwise  apportioned 
costs. 

5.  The  additional  cost  of  a  specific  service  is  a  corollary  of  the 

cost  theory  which  affords  a  legitimate  basis  of  special  rates 
on  certain  traffic  which  cannot  be  moved  at  average  rates. 

Columbia  Studies,  Vol.  37,  pp.  17-18, 146-154.  Tale  Review, 
Vol.  18,  pp.  129-133,  142-152.  Quarterly  Journal 
Economics,  Vol.  27,  pp.  27-49.  Johnson,  pp.  271-272. 
Ripley,  pp.  44-56.  Whitten,  pp.  39-40,  41,  66,  82. 
Erickson,  Keg.  Piib.  UtU.  pp.  3-5,  14,  25-33. 

(c)  The  valuc-of-tlie-seri'ice  theory  makes  railway  rates  com- 
mensurate with  what  the  public  will  pay  rather  than  go  with- 
out the  service,  the  degree  of  approximation  being  at  the  discre- 
tion of  the  carriers. 

1.  This  theory  has  been  generally  applied  and  defended  by  rail- 
way managers  upon  the  claim  that  "one's  business  is  his 
own  and  he  may  properly  sell  his  product  for  what  he  can 
get". 


52  THE   UNIVERSITY   OF  WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  53 

2.  Since  railways  are  characteristically  monopolistic,  the  value-of- 

the-service  theory  dictates  the  exaction  of  monopoly  prices 
for  transportation  services. 

3.  When  applied  to  specific  services,  the  value-of-the-service  the- 

ory may  at  times  indicate  less-than-cost  rates,  thus  introduc- 
ing personal  and  local  discrimination. 

Columbia  Studies,  Vol.  37,  pp.  52-56,  80-81.    Tale  Review, 
Vol.  18,  pp.  125-129.    Ripley,  pp.  166-184. 

(d)  The    value-of-the-commodity    theory    (taxation    theory) 
makes  rates  proportionate  to  the  respective  values  of  commodi- 
ties per  unit  of  weight  or  volume. 

1.  This  theory  is  a  derivative  of  the  cost-of-the-service  theory  in 

that  the  expense  of  insurance,  storage,  care  in  handling  at 
terminals  and  in  transit,  and  the  speed  of  transport  are  more 
or  less  commensurate  with  value  of  goods. 

2.  This  theory  is  indirectly  related  to  the  value-of-the-service  the- 

ory since  the  -place  utility  resulting  from  a  performed  trans- 
portation service  enters  into  the  value  of  the  commodity. 

3.  The  value-of-the-commodity  theory  affords  a  useful  expedient 

at  times  but  is  not  a  scientific  theory  of  rate  making. 

Ripley,    pp.    168,    180.      Ripley,    Problems,    pp.    123-124. 
'  Quarterly  Jour.  Econ.  Vol.  5,  p.  438. 

(e)  The  developmental  theory  of  rates  is  applied  in  justifi- 
cation of  favorable  rates  to  young  industries  and  newly  settled 
districts. 

1.  Developmental  rates  are  often  below  the  average  unit  cost  of  the 

service,  thus  shifting  the  deficit  upon  less  favored  industries 
and  localities. 

2.  "Commodity  rates"  based  upon  the  developmental  principle  are 

discriminatory  and  may  be  reasonable  or  unreasonable  ac- 
cording to  conditions  prevailing  in  each  case. 

Ripley,  pp.  152,  157-162,  177-178. 

(f)  The  keep-everybody-in-business  theory  of  rates  equalizes 
geographical  and  other  differential  advantages  in  production  by 
making  compensatory  differentials  in  rates. 

1.  This  principle  of  rate  making  is  an  ultra-discriminatory  corol- 

lary of  the  value-of-the-service  theory. 

2.  Any  rate  system  which  tends  to  equalize  natural  economic  dif- 


54  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  55 

ferentials  is  inimical  to  normal  industrial  and  social  devel- 
opment and  violates  the  principles  of  public  policy. 

Ripley,  pp.  119-122,  127,  148,  159,  161-162.    Yale  Review, 
Vol.  18,  pp.  125-126. 

(g)  The  postal  theory  of  rates  disregards  geographical  dif- 
ferential advantages  in  industry  by  equalizing  rates  regardless 
of  distance. 

1.  When  correlated  with  the  cost-of-the-service  theory,  the  postal 

theory  may  be  properly  applied  to  mail  rates,  urban  passen- 
ger rates,  and  under  certain  conditions  to  through  freight 
rates. 

2.  As  a  general  principle,  the  postal  theory  is  dangerously  discrim- 

inatory. 

Ripley,  pp.  127-134. 

(h)  The  so-called  "what-the-traffic-will-~bear-doctrine"  is  not  a 
rate  theory,  but  an  opportunistic  method  of  constructing  classi- 
fications and  rate  schedules  regardless  of  any  logical  principle. 
It  savors  strongly  of  the  value-of-the-service  theory ;  but  in  sig- 
nificant instances  rests  upon  the  cost-of-the-service. 

\Vhat-the-tranic-will-bear  is  a  thoroughly  indefinite,  primitive, 
and  unscientific  criterion  of  railway  rates. 

Johnson,  p.  288.    Ripley,  pp.  171-172.    La  Salle,  pp.  39- 

40. 

(i)  Passenger  fares  are  generally  calculated  upon  a  distance 
basis,  and  closely  conform  to  the  cost-of-the-service  theory. 

Johnson  and  Huebner,  vol.  2,  pp.  260-275. 
(j)  In  determining  rate  theories  to  be  applied,  the  predomi- 
nant motive  of  the  service  controls. 

1.  Private  self-interest  dictates  an  expeditious  application  of  the 

value-of-the-service  theory  or  what-the-traffic-will-bear. 

2.  Economic  interests  of  the  consuming  public  dictate  the  use  of 

the  cost-of-the-service  theory. 

3.  Ultra  social  or  political  interests  may  indicate  other  rate  theo- 

ries, i.  e.  socialistic  or  postal. 

Columbia  Studies,  Vol.  37,  pp.  12-13. 


56  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  57 


QUESTIONS 

1.  Dr.  A.  M.  Sakolski  argues  that,  since  the  more  traffic  car- 

ried the  lower  is  the  cost  of  carrying  each  unit,  and 
since  railway  rates  themselves  influence  the  volume  of 
business,  ' '  to  base  rates  on  cost  would  be  an  attempt  to 
find  one  unknown  quantity  by  using  another. " 

Discuss   the   logic    of   this   proposition.       Sakolski, 
p.  4. 

2.  Dr.  J.  M.   Clark  says,   "The  value  of  a  transportation 

service  is  sometimes  defined  as  the  difference  between 
the  price  of  the  commodity  in  question  at  the  point  of 
shipment  and  the  price  at  the  destination — The  sugges- 
tion is  altogether  deceptive,  for  the  difference  in  price 
itself  depends  on  the  transportation  charges. " 
Discuss  the  logic  of  this  proposition. 


58  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  59 


CHAPTER  VIII 
CLASSIFICATION  AND  TARIFF  STRUCTURES 

(a)  Two  processes  are  involved  in  the  determination  of  trans- 
portation rates  to  be  applied  to  specific  shipments;  i.  e.,  the 
classification  of  articles  and  the  fixing  of  rates  per  unit  for  any 
given  haul.    These  processes  constitute  the  practical  application 
of  rate  theories. 

1.  Articles  are  classified  upon  bases  of  similarity  as  to  physical 

characteristics,   relative  values,   and   quality   of  service   re- 
quired into  an  array  of  more  or  less  homogeneous  groups. 

Official  Classification — 14  groups. 

Western  Classification — 16  groups. 

Southern  Classification — 17  groups. 

2.  Classification  books  enumerate  articles  by  groups   or  classes 

without  reference  to  rates. 

3.  Class  tariffs  or  rate  sheets  indicate  the  charge  per  unit  upon 

each  class  of  traffic  from  each  to  every  other  point  of  ship- 
ment. 

4.  The  transportation  of  some  articles  involves  extratordinary  rate 

considerations.      Such   articles    may   be   excluded   from   the 
classification  and  given  special  or  "commodity"  rates. 
Commodity  tariff  sheets  indicate  the  rates  on  specified  articles 
for  given  hauls. 

Johnson,  pp.  113-118.  Johnson  &  Huebner,  Vol.  I,  pp.  334, 
340-1.  Ripley,  pp.  297-303,  314-325,  340.  La  Salle, 
pp.  34-39. 

(b)  The  cost-of-the-service  or  "relative  costs"  theory  enters 
largely  in  modern  classifications.     It  tends  to  assign  respectively 
relative  proportions  of  total  transportation  cost  to  groups  of 
commercially  similar  articles. 

1.  European  classifications  are  constructed  primarily  upon  this 
basis. 


60  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  61 

2.  Recent  rate  regulation  has  generally  been  undertaken  upon  the 
cost-of-the-service  theory. 

Hammond,  Rate  Theories  of  the  I.  C.  C.,  pp.  42-69,  especial- 
ly 52,  186-192.  Columbia  Studies,  Vol.  37,  pp.  13,  15- 
19.  American  Economic  Review,  March  1914,  pp.  69- 
80.  1  Wis.  RR.  Com.  Rep.  325.  9  Wis.  RR.  Rep.  629. 

(c)  Commodity  rates  are  obviously  discriminatory;  discrimi- 
nation being  justified  by  "  extraordinary ' '  competitive  conditions, 
by  the  "  direct  cost  of  the  specific  service "  on  traffic  which  will 
bear  no  higher  rate,  or  by  the  application  of  the  developmental 
theory  of  rates  to  the  products  of  youthful  industries. 

1.  The  elimination  of  unreasonable  rates  tends  to  reduce  the  num- 

ber of  commodity  rates. 

2.  Industrial  maturity  removes  the  motive  of  the  developmental 

theory  and  reduces  the  number  of  commodity  rates. 

Ripley,  134-140,  143-144,  157-158,  213,  322-325,  425,  615. 
Yale  Review,  Vol.  16,  p.  86.  McPherson,  Railroad 
Freight  Rates,  pp.  117-126,  138-143. 

(d)  Classification  of  freight,  in  the  United  States,  is  the  main 
function  of  three  permanent  committees  of  traffic  officials.    The 
Official  Classification  is   formulated  by  representatives  of  540 
roads,  the  Western  Classification  applies  to  480' roads,  and  the 
Southern  Classification,  to  170  roads. 

1.  The  three  classifications  differ  in  the  number  of  classes  and  in 

the  rating  of  particular  articles. 

2.  Classifications  differ  as  to  car-load  ratings  and  car-load  minima. 

Ripley,  pp.  303-306,  325-337.  Johnson  &  Huebner,  Vol. 
1.  pp.  335-339. 

(e)  There  is  a  gradual  movement  toward  uniform  classifica- 
tion for  the  entire  country.     A  Committee  on  Uniform  Classifi- 
cation with  headquarters  in  Chicago  is  engaged  in  preparing 
uniform  descriptions,  package  specifications,  and  carload  rules 
pertaining  to  articles  which  move  by  freight;  and  recommends 
consideration  of  same  to  the  three  classification  committees. 

1.  The  advantages  of  uniform  classification  pertain  mainly  to  the 
facilitating  of  through  traffic  and  the  calculation  of  joint 
rates. 


62  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAHLWAY    TRANSPORTATION  63 

2.  The  obstacles  in  the  way  of  uniform  classification  are  sectional 
differences  in  industrial  and  traffic  conditions. 

Ripley,  pp.  337-353.  Johnson  &  Huebner,  Vol.  1,  p.  339. 
Xoyes,  pp.  77-78.  McPherson,  p.  304. 

(f)  Tariffs  are  nominally  made  by  the  traffic  officials  of  the 
respective  roads,  but  are  finally  sanctioned  by  the  traffic  associa- 
tions and  are  issued  by  their  officers  acting  as  * '  agents ' '  for  the 
subscribing  lines. 

Johnson  &  Huebner,  Vol.  1,  pp.  306-308. 

(g)  The  following  characters  and  terms  signify  conventional 
types  of  rates — C.  L.,  L.  C.  L.,  Local,  Joint,  Through,  Blanket, 
Arbitrary,  Differential,  Export,  Import,  Combination,  Concen- 
tration,   Rail   and  water,   Proportional,    Terminal,   Individual, 
Intermediate,  and  Transit. 

(h)  Administrative  control  of  railways  is  largely  effective 
through  the  authority  of  commissions  over  classifications  and 
tariffs. 

1.  The    Interstate    Commerce    Commission   may    declare   existing 

classifications  and  tariffs  unreasonable  and  may  prescribe 
maximum  rates  in  specific  instances;  it  may  suspend  proposed 
changes  during  investigation,  and  may  nullify  existing  or 
proposed  rates  for  a  period  of  three  years.  Thirty  days'  no- 
tice is  usually  required  before  rate  changes  become  effective. 

2.  The  Wisconsin  Railroad  Commission  may  permanently  suspend 

existing  or  proposed  rates,  and  may  determine  reasonable 
rates  to  apply  in  lieu  thereof. 

3.  Rates  are  effectively  changed  by  shifting  articles  from  class  to 

class,  by  modifying  specifications  as  to  C.  L.  and  L.  C.  L. 
shipments,  by  shifting  articles  from  commodity  rates  to  class 
rates  and  vice  versa,  and  by  directly  changing  class  and  com- 
modity tariffs. 

Ripley,  pp.  306-314,  505,  561-564,  594-600,  534-536,  525- 
526.  I.  C.  C.  Act,  Sec.  1,  10,  15.  Wis.  RR.  Law,  Sec. 
1797-14.  Johnson,  pp.  376-384. 

(i)  Freight  rates  in  the  United  States  steadily  and  markedly 
declined  from  the  beginning  to  1900.  After  1900,  there  was  a 
clearly  defined  upward  movement  until  1905,  followed  by  a 
gradual  return  to  the  average  of  rates  for  1902. 

On  the  contrary,  passenger  rates  exhibited  no  marked  decline 


64  THE   UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  65 

from  1870  until,  in  1908,  there  began  a  series  of  legislative  re- 
ductions. 

1.  Earnings  per  ton  and  passenger  mile — 

Year  Ton-mile  Passenger  mile 

1870   1.89  cts. 

1880   1.23  cts. 

1890    941  cts.  2.167  cts. 

1892    898  cts.  2.126  cts. 

1894    860  cts.  1.986  cts. 

1896    806  cts.  2.019  cts. 

1898    753  cts.  1.973  cts. 

1900    729  cts.  2.003  cts. 

1902    757  cts.  1.986  cts. 

1904    780  cts.  2.006  cts. 

1906    748  cts.  2.003  cts. 

1908 754  cts.  1.937  cts. 

1910   753  cts.  1.938  cts. 

1911  .' . .     .757  cts.  1.974  cts. 

1912  (Official  Classification  Terri- 

tory)      644  cts.  1.840  cts. 

1913  (Official  Classification  Terri- 

tory)                                    .637  cts.  1.852  cts. 


2.  Rates  from  New  York  to  Chicago  (in  cents  per  100  Ibs.) 

Classes 


1 

2 

3 

4 

5 

1862 

Oct  

.  .  .  .  180 

150 

125 

75 

1863 

Mav  

.  ...  160 

117 

94 

55 

1864 

Sept  

.  ...  215 

180 

120 

96 

1865 

Oct  

.  .  .  .  215 

180 

90 

82 

1866 

Mar  

.  ...  188 

160 

127 

82 

1867 

Xov  

,  .  .  .  202 

170 

138 

86 

1868 

Sept  

188 

160 

127 

82 

Oct  

....   70 

60 

55 

50 

Dec  

.  .  .  .  202 

170 

138 

86 

1869 

Aug  

.  .  .  .   25 

25 

25 

25 

25 

Xov  

.  .  .  .  150 

130 

100 

80 

55 

1870 

Jul  

.  .  .  .   50 

50 

50 

45 

35 

Dec  

.  .  .  .  180 

150 

120 

80 

60 

1871 

Jun  

.  .  .  .  100 

90 

70 

55 

45 

Sept  

.  .  .  .   30 

30 

30 

30 

24 

Dec  

.  .  .  .  125 

110 

85 

65 

50 

1872 

Aug  , 

75 

70 

60 

45 

35 

Oct  

.  .  .  .  125 

110 

85 

65 

50 

40 


THE   UNIVERSITY   OF   WISCONSIN 
66 


AMERICAN    RAILWAY   TRANSPORTATION 


67 


1873 

Apr  

100 

90 

75 

60 

45 

Aug  

27 

27 

18 

18 

17 

1874 

Jan  

100 

90 

75 

60 

45 

Aug  

75 

70 

60 

45 

35 

1875 

Jan  

100 

90 

75 

60 

45 

May  

40 

40 

35 

35 

25 

1876 

Jan  

75 

70 

60 

45 

35 

Jul  

15 

15 

15 

10 

10 

1877 

Mar  

75 

70 

60 

45 

35 

Oct  

100 

90 

75 

45 

1878 

Feb  

75 

60 

50 

40 

1881 

Aug  

45 

32 

26 

19 

Xov  

60 

50 

40 

28 

1882 

Jan  

45 

32 

26 

19 

Xov  

75 

60 

45 

35 

1883 

Jun  

75 

60 

45 

35 

25 

1885 

Jan  

50 

40 

30 

25 

18 

Xov  

75 

60 

45 

35 

25 

1887 

Apr  

75 

65 

50 

35 

30    25 

1888 

Jan  

75 

65 

50 

38.5 

33   .  27.5 

Xov  

50 

40 

35 

30 

25    20 

1888 

Dec.  to  1914.. 

75 

65 

50 

35 

30    25 

3.  The  rate  index  (average  of  published  rates)  fell  from  130  cents 

per  100  pounds  in  1867  to  85  cents  per  100  pounds  in  1900. 
(Data  for  later  years  not  available). 

4.  In    interpreting    revenue-per-ton-mile    statistics,    consideration. 

must  be  given  to  the  nature  of  the  traffic,  the  length  of  the 
haul  and  the  relative  proportions  of  local  and  thorough  busi- 
ness, and  to  the  volume  of  traffic. 

The  rate  index  must  be  interpreted  in  connection  with  changes 
in  the  classifications,  and  divergencies  from  published  rates. 

In  recent  years,  rate  advances  have  been  largely  accomplished 
through  changes  in  classifications. 

5.  The  primary  causes  of  the  decline  in  freight  rates  have  been- 

rate  wars,  technical  improvements,  and  the  growth  of  traffic. 
The  nature  of  railway  competition,  and  the  economic  status  and 
national    psychology    of   the   American   people   explain   the- 
course  of  passenger  fares. 

Ripley,  pp.  23,  411-^30,  594-600.  Noyes,  Chap.  7.  John- 
son &  Huebner,  Vol.  1,  Chap.  3.  Decision  of  I.  C.  C. 
in  the  recent  5  per  cent  advance  rate  case.  For  rate 
comparisons  see  Infra.  Chapter  III. 


THE   UNIVERSITY   OF   WISCONSI 
€8 


AMERICAN    RAILWAY   TRANSPORTATION 


69 


PROBLEMS 
LOCAL  CLASS  TARIFF.    C.  M.   &  ST.  P. 


Between 

Madison,  Wis. 

and 


Classes. 

Rates  in  cents  per  100  pounds. 
345678 


10 


Portage    Wi«           

•>6  5 

21.: 

18 

13 

10.5 

10.5 

7 

6.5 

5 

4.5 

La  Cros^e    Wis 

43  5 

34  5 

•77 

•n  5 

17 

18 

12.5 

10 

8 

7.5 

Red  Wing    Minn 

60 

50 

40 

25 

20 

25 

20 

17 

14 

13 

Minneapolis    Minn 

60 

50 

40 

25 

20 

25 

20 

17 

14 

13 

Aberdeen    S   D  

114 

95 

67 

50 

37 

44 

38 

32 

25 

22 

JOINT   CLASS  TARIFF.    C.    &  N.  W. 


Between 

Chicago  and 

(via  D.  S.  &  S.  A.) 


Classes. 

Rates  in  cents  per  100  pounds. 
4          5          6          7 


9        10 


Duluth,  Minn 

Marquette,  Mich 

Soo  Junction,   Mich 

Sault  Ste.  Marie,  Mich.. 
Houghton,  Mich 


65 

55 

44 

28 

22 

60 

50 

40 

28 

22 

75 

65 

48 

38 

30 

75 

65 

48 

38 

30 

76 

63 

50 

32 

25 

28 

22 

19 

17 

18 

28 

22 

19 

17 

14 

38 

35 

30 

25 

23 

40 

35 

30 

25 

23 

32 

25 

21 

18 

16 

COMMODITY  TARIFF.    C.    &   N.  W. 


Between 
Milwaukee 
and 

Horses 
and 
mules. 

(Car  load  rates  in  cents  per  100  pounds.) 
Hogs.          Sheep.          Grain.         Bricks. 

Peoria,  111  

14.3 
14.3 
16.1 
17.5 

16 
16 
16.2 
17 

17.5 
17.5 
20 
21 

9 
9 

10 
10 

7 
7 
7.5 
7.5 

Luther,  111  

Girard    111 

Benld,  111 

Classification  (V 
Electric  fans  —  In  boxes 
In  boxes. 

Western) 

L.  C.  L. 

1 

C.  L. 

4 

min.  wt. 

30.000  Ibs 

Nitric  acid — In  glass  or  earthenware,  packed  in  bbls.  1 

In  carboys D 1 

In  packages  named,  min.  wt.  30,000  Ibs. 

Rattan  chairs — S.  U.  in  boxes,  crates,  or  wrapped..  3tl 

K.  D.  in  crates  or  wrapped Dl 

Soapstone — In  bags,  barrels,  or  boxes 4 

Same,  min.  wt.  40,000  Ibs 


70  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  71 

Window  glass — In  boxes,  external  measurement  ex- 
ceeding   86    inches,    length    plus 

girth 1 

Not  exceeding  86  inches 2 

Not  exceeding  68  inches   4 

In  boxes,  min.  wt.  36,000  Ibs 5 

1.  Quote  the  local  rate  from  Madison  to  Aberdeen,  S.  D.  and 

the  joint  rate  from  Chicago  to  Marquette,  Mich.,  on 
window  glass.  15  by  20  inches,  for  a  shipment  of  9,000 
Ibs.  For  72,000  Ibs.  For  50,000  Ibs.  Does  the  two- 
f or-one-rule  apply  ? 

2.  What  is  the  rate  from  Milwaukee  to  Peoria,  111.,  on  a  ship- 

ment of  bricks  weighing  45,000  Ibs? 

3.  See  proper  classifications  and  tariffs  and  quote  the  rate  on 

cotton  shipments  from  Houston,  Tex.,  to  New  York. 

4.  In  what  ways  may  classifications  be  used  for  discriminatory 

purposes  ? 

5.  If  there  is  no  joint  tariff,  how  are  through  rates  quoted? 

6.  Plot  curves  from  the  New  York-Chicago  rates  and  from  the 

revenue-ton-mile  statistics,  and  explain  as  fully  as  pos- 
sible fluctuations  and  general  tendencies. 


THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN  RAILWAY  TRANSPORTATION  73 


CHAPTER  IX 
RATE  SYSTEMS  IN  THE  EAST  AND  SOUTH 

(a)  Differences  in  industrial  and  trade  conditions  cause  rate- 
making  practices  to  vary. 

1.  In  the  East  and  Northeast  the  Official  Classification  and  "dis- 

tance tariffs"  prevail. 

2.  In  the  South  the  Southern  Classification  and  the  "basing  point" 

system  of  tariffs  are  used. 

3.  In  the  West  and  Southwest  extraordinary  conditions  of  compe- 

tition and  rapid  industrial  development  have  led  to  wide  dis- 
crimination in  rates  as  among  localities.  (See  Chapter  X). 

Johnson  and  Huebner,  Vol.  1,  p.  382. 

(b)  Official   Classification  territory  is   relatively  mature   in 
matters  of  industry  and  trade,  and  is  subject  to  more  scientific 
and  stable  transportation  arrangements  than  other  sections  of 
the  country. 

1.  The    MacGraham   percentage   system   of   rates  was  applied  to 

coast-bound  traffic  in  1876.  Class  and  commodity  rates  were 
made  commensurate  with  the  Chicago-New  York  rate  in  direct 
proportion  to  respective  distances. 

2.  In  1879  composite  "line"  and  "terminal"  charges  were  substi- 

tuted for  distance  rates. 

A  uniform  terminal  charge  of  six  cents  per  hundred  weight  was 
made  an  element  of  each  rate.  The  remaining  part  of  the 
Chicago-New  York  rate  was  made  the  base  for  calculating  the 
line  charge  from  intermediate  points.  Such  rates  now  apply 
also  to  west-bound  traffic. 

3.  Differentials  were  applied  to  other  coast  cities  to  equalize  trade 

conditions.  Boston  and  common  points  paid  5  cts.  more  than 
New  York;  Philadelphia,  2  cts.  less,  and  Baltimore  3  cts.  less. 
(For  present  differentials  see  Johnson  and  Huebner,  Vol.  1, 
p.  93). 


74  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  75 

4.  Intermediate  localities  other  than  junction  or  common  points 

are  subject  to  arbitrary  rates  to  nearest  common  points  plus 
respective  through  rates  east  or  west,  care  being  taken  not 
to  violate  the  long-and-short  haul  clause  of  the  Interstate 
Commerce  Law. 

5.  Local  shipments  in  Official  Territory  are  graded  by  distance  to 

seventy-five  miles  and,  thereafter,  subject  to  regressive  gra- 
dients. 

6.  A  strict  distance  tariff  is  departed  from  in  many  instances  be- 

cause of: 

Interrailway  competition  at  certain  junction  points. 
The  desirability  of  keeping  cross-lines  as  nearly  as  possible  in 

non-competitive  zones. 
The  adjustment  of  elements  of  trade  rivalry  of  industrial  and 

commercial  centers. 

7.  A  classification  of  alternative  routes  is  made  upon  a  basis  of 

speed  and  other  service  qualities,  and  corresponding  rate 
differentials  prevail. 

Routes  Rate  per  100  pounds 

New  York  to  Chicago  First  class 

Standard  Rail 75  cents 

Differential  Rail   69  cents 

Standard  Rail  and  Lake 62  cents 

Differential  Rail  and  Lake 52  cents 

Canal  and  Lake  42  cents 

8.  Certain  states,  in  trunk-line  territory,  have  made  regulations 

without  regard  to  the  general  system  of  rates.  In  such  cases 
the  maximum  rates  fixed  by  the  states  are  usually  above  the 
standardized  rates,  and  no  conflict  results. 

Johnson  &  Huebner,  Vol.  1,  pp.  383-405.    Ripley,  pp.  354- 
379.    McPherson,  pp.  67-78. 


(c)  Railway  traffic  into  and  out  of  the  South  is  subject  to  a 
measure  of  effective  water  competition  on  all  sides  and  to  rivalry 
among  distributive  markets  which  result  in  a  rate  system  de- 
signed to  equalize  conditions  of  competition  rather  than  to  com- 
ply with  scientific  economic  doctrine. 

Southern  railway  charges  are  characterized  by  low  and  equal- 
ized through  rates  to  competitive  centers  known  as  "basing 
points",  by  a  system  of  differentials  as  between  all-rail,  rail- 


s 


76  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  77 

and-water,  and  all-water  routes,  and  by  highly  discriminatory 
local  rates. 

1.  Water  competition  controls  rates  from  the  Northeast  to  south- 

ern basing  points — to  coastal  points  by  direct  service  and  to 
interior  points  by  operation  of  the  long-and-short-haul  clause. 

Actual  or  potential  competition  is  effective  on  the  Ohio  and  Mis- 
sissippi Rivers. 

Recognized  rivalry  of  western  and  eastern  producers  and  dis- 
tributors has  extended  the  benefit  of  water  competition  to  the 
North  and  Northwest. 

2.  Basing  points  may  be  divided  into  four  classes: 

Sea  ports  from  Norfolk  to  New  Orleans  and  river  ports 
from  New  Orleans  to  Cincinnati. 

Cities  located  at  head  of  navigation  on  southern  rivers, 
such  as  Richmond,  Augusta,  and  Montgomery. 

Railway  gateways  and  commercial  centres,  such  as  Atlanta 
and  Birmingham. 

Industrial  and  commercial  points  of  competitive  import- 
ance not  included  in  other  groups. 

3.  Under  the  basing  point  system,  a  base  rate  applies  from  outside 

common  points  to  each  basing  point.  Through  rates  to  other 
than  basing  points  are  combinations  of  the  base  rate  and  the 
respective  local  rates  from  the  basing  point.  Local  rates  are 
relatively  high  and  somewhat  proportionate  to  distance. 

4.  The  Baltimore-Atlanta  rate  is  the  main  base  rate  used  in  calcu- 

lating all  through  southern  rates. 

Differentials  prevail  as  between  Baltimore  and  New  York,  Phila- 
delphia, and  Boston  common  points  in  shipments  from  At- 
lanta common  points. 

5.  Rates  into  the  South  from  the  North  and  Northwest  are  equal 

to.  the  rates  from  points  of  shipment  to  the  Ohio  River  plus 

the  respective  rates  from  the  Ohio  to  destination. 
Ohio  River  gateways  all  take  the  shortest-haul  distance  tariffs 

from  northern  points,  and  usually  take  the  same  rate  to  each 

basing  point. 
Atlanta  common  points  take  the  same  rate  from  all  Ohio  River 

crossings  which  is  the  Baltimore  rate.     Other  southern  points 

take  differentials  over  the  Atlanta  rate. 
Trans-Mississippi  traffic  to  Atlanta  via  Memphis  takes  a  4-cent 

differential  under  the  Ohio  rates. 
Out-bound  rates  for  the  North  are  not  so  clearly  related  to  the 

Baltimore  rates. 

Johnson  &  Huebner,  Vol.  1,  pp.  -107-438,  Ripley,  pp.  380- 
393.    McPherson,  pp.  85-92. 


78  TEIE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  79 

(d)  Texas  rates  are  adjusted  to  partially  equalize  industrial 
and  trade  conditions  in  that  state ;  namely,  accessibility  of  mar- 
kets from  producing  districts  within  the  state,  and  competitive 
rail  and  water  rates  between  Texas  and  eastern  points. 

1.  Texas  intrastate  rates  are  computed  upon  a  graded  and  max- 

imum tariff. 

2.  Interstate  rates  to  Texas  common  points  are  equalized  as  be- 

tween Atlantic  coast  cities  and  inland  distributing  centres. 

3.  Eastern  rates  are  adjusted  to  meet  water  competition  via  the 

Gulf. 

Johnson  &  Huebner,  Vol.  1,  pp.  434-438.    Kipley,  pp.  393- 
395.    McPherson,  pp.  92-102. 

QUESTIONS 

1.  Would   the   strict  application  of  the   long-and-short-haul 

clause  completely  destroy  the  basing  point  system  of  rate 
making?  Explain. 

2.  Explain  the  probable  effect  of  applying  the  principles  of 

the  distance  tariff  to  rate  making  in  the  South  and  in 
Texas. 

3.  Not  long  ago  the  Texas  Railroad  Commission  ordered  a  re- 

duction of  5  cents  in  a  local  rate  from  Waco,  a  point  in 
central  Texas,  to  Galveston.  Explain  the  probable  ef- 
fect of  the  change  on  through  rates  between  Texas 
common  points  and  points  in  the  eastern  half  of  the 
United  States.  May  such  a  change  affect  interstate 
rates  on  traffic  which  does  not  touch  Texas?  Explain. 


80  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  81 


CHAPTER  X 


WESTERN,  TRANSCONTINENTAL,  AND  IMPORT  AND 
EXPORT  RATES 

(a)  East-bound  and  west-bound  traffic  in  western  territory, 
excepting  traffic  moving  under  transcontinental,  export,  or  im- 
port rates,  is  subject  to  rate  differentials  generally  established 
with  regard  to  certain  "differential  territory"  delineated  by 
Milwaukee,  Chicago  and  St.  Louis  on  the  east,  the  Rocky  Moun- 
tains on  the  west,  and  subdivided  by  the  Mississippi  and  Missomi 
rivers. 

North-bound  and  south-bound  rates  are  so  adjusted  as  to 
equalize  trade  conditions  as  among  Chicago,  Omaha,  St.  Louis, 
and  the  Twin  Cities. 

1.  Rates  to  and  from  eastern  points  are  combinations  of  the  respec- 

tive differentials  assigned  from  points  of  origin  to  the  Mis- 
sissippi, from  the  Mississippi  to  the  Missouri,  and  west  of  the 
Missouri  to  points  of  destination. 

2.  Traffic  consigned  from  St.  Louis  westward  takes  a  5-cent  to  20- 

cent  differential  below  Chicago  traffic;  and  east-bound  freight 
is  burdened  with  a  reciprocal  differential. 

3.  Minneapolis  and  St.  Paul  rates  to  and  from  Chicago  and  St. 

Louis  are  equalized  by  a  5  per  cent  differential  against  St.- 
Louis.  This  is  about  25  per  cent  below  the  Chicago-Omaha 
rate. 

4.  Twin   City    rates   with   intermediate   points   are   made   propor- 

tional to  Chicago,  St.  Louis,  or  Omaha  rates. 

Through  traffic  to  or  from  the  east  via  the  Twin  Cities  meets 
rail  and  lake  competition  during  the  navigation  season,  re- 
sulting in  low  commodity  rates. 

Canadian  competition  together  with  lake  competition  make  the 
Chicago-Minneapolis  share  of  joint  rates  very  low. 

5.  In  Western  Territory,  all  points  within  a  considerable  area  about 

shipping  centers  are  called  common  points  and  take  the  same 
rate. 
Johnson  &  Huebner,  Vol.  1,  pp.  440-454. 

6 


82  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  83 

(b)  Transcontinental  rates  originally  applied  to  traffic  be- 
tween relatively  narrow  strips  of  territory  on  the  Atlantic  'and 
Pacific  seaboards,  and  were  determined  by  conditions  of  compe- 
tition with  the  sea  route  around  Cape  Horn  and  the  rail-and- 
water  route  via  the  Isthmus  of  Panama. 

Transcontinental  tariffs  now  apply  (with  exceptions)  to 
through  traffic  between  points  east  of  the  Missouri  River  and 
west  of  the  Rocky  Mountains. 

1.  Generally,  west-bound  tariffs  blanket  all  territory  east  of  the 

Missouri  on  consignments  to  "Pacific  terminals"  and  inter- 
mediate points.  The  latter  take  the  terminal  rate  plus  local 
rates  from  terminals  to  destination. 

2.  East-bound   tariffs  blanket  "California  Coast  Terminals"   and 

"North  Pacific  Coast  Terminals"  in  consignment,  and  recog- 
nize ten  "rate  groups'  (blanketed  areas  east  of  the  Rockies) 
by  gradients  in  the  rates. 

3.  West-bound  rates  are  usually  higher  to  intermediate  points  than 

to  Pacific  terminals. 

East-bound  rates  from  intermediate  points  are  usually  higher 
than  from  Pacific  terminals. 

A  general  rule  which  fixes  the  limit  of  discrimination  against 
intermediate  points  provides  that  through  rates  may  not  ex- 
ceed the  "sum  of  the  locals". 

4.  Local    discrimination    resulting   from    the    present    transconti- 

nental rate  system  forms  the  basis  of  recent  action  by  the 
.Interstate  Commerce  Commission  directed  toward  a  recon- 
struction of  tariffs  by  introducing  a  zone  system  of  propor- 
tional differentials  over  terminal  rates  on  west-bound  traffic. 
(See  Ripley,  pp.  610-619). 

Johnson  &  Huebner,  Vol.  1,  pp.  456-488.  I.  C.  C.  Rep. 
XV.  pp.  376-426,  XVI.  pp.  179-181,  XIX,  pp.  162-217, 
238,  256. 

(c)  Certain  articles  of  import  and  export  enjoy  lower  rates 
than  like  goods  of  domestic  commerce. 

1.  Three  influences  have  contributed  to  concessionary  export  rates: 
Competition    among    through     (rail-and-sea)     routes    and    the 

equalization  of  advantages  of  more  favored  lines  by  low  rates 

on  the  haul  of  less  favored  lines. 
Aid  to   certain   industries   and   localities   in   developing  trade 

in  foreign  markets. 
Interregional  and  international  competition  for  foreign  markets. 


84  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  85 

2.  Special  rates  on  imported  goods  have  customarily  been  granted 

in  consideration  of  the  following: 

Competition  among  transportation  routes. 

Equalization  of  costs  of   raw  materials  to   rival   manufactur- 
ing interests. 

Nullification  of  tariff  restrictions  on  trade. 

3.  Import  and  export  rates  apply  chiefly  to  traffic  from  the  sea- 

board to  Central  Freight  Association  territory. 
Billings  may  be  direct  from  points  of  origin,  or  subject  to  delay 

in  transit  at  ports  of  entry. 

Johnson  &  Huebner,  Vol.  1,  pp.  492-522.    Ripley,  pp.  406- 
410. 

QUESTIONS 

1.  What  reasons  which  do  not  now  apply  may  have  justified 

west  bound  terminal  and  differential  rates  in  the  past  ? 

2.  Should  .the  present  system  of  transcontinental  rates  be  ex- 

tended to  meet  competition  on  goods  which  may  move 
via  the  Panama  Canal  at  lower  than  existing  rates? 
Why? 

3.  Why  are  railways  interested  in  the  matter  of  canal  tolls  on 

coasting  vessels  ? — in  the  financial  control  of  steamships 
using  the  Panama  Canal? 

4.  In  case  import  or  export  rates  are  lower  than  the  average 

unit  cost  of  the  service,  who  pays  the  deficit?  Who 
pays  if  the  rate  is  below  the  cost  of  the  specific  service  f 


THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  87 


CHAPTER  XI 
THE  RAILWAY  CORPORATION 

(a)  The  economic  advantages  of  the  corporate  form  of  organ- 
ization assume  their  greatest  significance  in  the  railway  business 
in  the  United  States. 

Where  the  railways  are  owned  by  tfre  government,  the  private 
corporation  is  displaced  by  an  administrative  department  and 
principles  of  public  policy  prevail  irrespective  of  private  pe- 
cuniary interests. 

1.  The  attributes  of  the  railway  corporation,  per  se,  are  chiefly 

private,  i.  e.  private  proprietorship,  private  initiative  in  man- 
agement, and  individuality  in  legal  status. 

2.  In  addition  to  the  primary  considerations  of  service  and  rates, 

certain  attributes  of  public  origin  and  significance  inhere  in 
the  railway  corporation,  i.  e.  the  right  to  exist,  property  ele- 
ments originating  in  public  aid  and  social  increments,  and 
certain  financial  features  of  significance  to  the  investing 
public.  (See  La  Salle,  pp.  189-198). 

Johnson,  pp.  69-73,  322-323.  Morris,  pp.  152,  156,  160,  173. 
See  Infra.  Chapter  III.  La  Salle,  pp.  173-176.  Cleve- 
land and  Powell,  Railroad  Finance,  pp.  110,  118. 

(b)  Railway  corporations  are  anteceded  by  the  promotion  of 
"projects"  which  contemplate  commercial,  social,  or  other  ad- 
vantages as  a  result  of  the  proposed  construction  or  reorganiza- 
tion of  railway  properties. 

1.  The  first  essential  of  an  attractive  commercial  project  is  the 
probability  of  securing  sufficient  traffic  at  remunerative  rates. 

Terminal  traffic  may  be  anticipated  through  the  medium  of  com- 
petition, or  by  traffic  arrangements  with  connecting  lines. 

Local  traffic  may  be  estimated  upon  the  basis  of  existing  indus- 
try or  of  industries  to  be  developed  along  the  proposed  line. 


88  THE    UNIVERSITY    OF    WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  89 

2.  Consolidation   projects   usually   anticipate    increased   revenues 

through  the  elimination  of  competition,  increased  efficiency 
in  organization  and  operation,  and  the  probability  of  im- 
minent cash  realization  by  the  sale  of  additional  securities 
issued  against  expected  profits. 

3.  Financial  backing  for  a  project  is  usually  enlisted  by  a  group 

of  men  personally  interested  in  the  undertaking  known  as 
promoters  and  organizers. 

Financial  arrangements  to  provide  construction  and  equipment 
funds  are  made  through  banking  and  brokerage  houses  which 
are  usually  associated  with  other  railroads  and  industrial 
corporations  in  matters  of  finance  and  management. 

Financial  houses  must  be  convinced  of  the  probable  prosperity 
of  the  proposed  corporation  and  of  its  non-interference  with 
the  success  of  businesses  in  which  they  are  already  interested. 

Morris,' pp.  1,  2,  7-10,  13-20.  Haney,  Business  Organiza- 
tion, p.  282.  Johnson,  pp.  89,  259-263.  Cleveland  & 
Powell,  Railroad  Finance,  pp.  20-22,  29-30,  287-290, 
320,  336.  Noyes,  pp.  155-157. 

(c)  Railway  corporations  are  created  by  a  legislative  grant  of 
the  right  to  exist  for  the  purpose  of  rendering  public  service. 

1.  A  railway  franchise  or  charter  is  a  grant  of  specific  privileges 

by  the  legislature  to  the  corporation.  It  may  properly  enum- 
erate reciprocal  obligations,  attributes  of  administrative  con- 
trol, and  the  time  and  conditions  of  termination. 
Charters  or  franchises  are  always  subject  to  certain  "reserved 
powers"  of  government  and  to  the  exercise  of  the  "police 
power". 

La  Salle,  p.  11.  Meyer,  p.  67.  Beale  and  Wyman,  sec.  16. 
Cleveland  &  Powell,  Railroad  Finance,  pp.  153-155.  Rail- 
road Promotion  and  Capitalization,  pp.  155,  160.  Bald- 
win, American  Railway  Law,  p.  25. 

2.  Charters  or  franchises  may  be  granted  by  special  acts  of  the 

legislature,  or  by  administrative  act  under  authority  of  gen- 
eral laws.     The  latter  method  is  now  almost  universal. 
Preliminary  steps  in  matters  of  finance  and  organization  must 
precede  the  granting  of  franchises. 

Cleveland  &  Powell,  Railroad  Finance,  p.  16.  Railroad  Pro- 
motion and  Capitalization,  pp.  156,  159. 

3.  Franchise  privileges  granted  to  railway  companies  include  the 

right  to  exist,  construction  rights,  eminent  domain,  and  a 
more  or  less  exclusive  right  to  sell  services  and  collect  rates 
and  fares. 


THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  91 

A  franchise  should  indicate  certain  obligations  to  patrons  (ade- 
quate service  and  reasonable  rates),  to  investors  (representa- 
tive and  efficient  management),  to  employees  (reasonable 
safety  and  fair  treatment),  and  to  the  general  public  (sup- 
port of  public  policy  and  aid  in  times  of  public  danger  or  dis- 
tress.) 

Independent,  Oct.  1892,  pp.  99,  104.  Cleveland  &  Powell,  Rail- 
road Finance,  pp.  153-156,  349-352,  118.  Ripley,  p.  443. 
Report  of  Board  of  Arbitration,  pp.  99,  104. 

(d)  Railways  are  financed  by  the  sale  of  stocks  and  bonds  to 
provide  sufficient  funds  for  promotion,  purchase  of  right  of  way, 
cost  of  construction  and  equipment,  and  to  maintain  operation 
during  periods  of  insufficient  operating  revenue. 

1.  Stocks  (stock  certificates)   entitle  the  holder  to  an  undivided 

interest  in  the  property  of  the  company,  and  to  a  propor- 
tional share  of  the  profits  and  of  certain  liabilities  of  the 
corporation. 

Common  stock,  theoretically,  carries  the  chief  risk  of  the  enter- 
prise and  is  ordinarily  vested  with  voting  power  and  the  con- 
sequent control  of  the  management. 

Preferred  stock  ordinarily  conveys  no  voice  in  the  administra- 
tion, but  takes  precedence  over  common  stock  in  the  order  of 
dividends  at  a  limited  rate. 

Wood,  Modern  Business  Corporations,  pp.  112-116.  Cleveland  & 
Powell,  Railroad  Finance,  pp.  39-45.  Moody,  The  Art  of 
Wall  Street  Investing,  pp.  59-63. 

2.  Bonds  are  the  promissory  notes  of   the  railroad  corporation. 

They  are  of  three  general  forms,  i.  e.  mortgage  bonds,  collat- 
eral trust  bonds,  and  income  bonds.  Notes  and  receiver's 

certificates  are  special  debt  obligations. 
The  following  are  characteristic  types  of  mortgage  bonds: 

First  Mortgage  division  bonds. 

Terminal  bonds. 

Equipment  bonds. 

Blanket  bonds. 

Refunding  prior  lien  bonds. 

Car  trust  bonds. 
Morris,  pp.  187-195.     Moody,  pp.  33,  37,  38,  44-45,  51,  54,  57,  139. 

Cleveland  &  Powell,  Railroad  Finance,  pp.  41,  48,  78,  79,  82- 

85,  243-245. 

3.  The  following  technical  processes  are  involved  in  the  issue  of 

railway  securities: 

Subscription. 

Certification. 


92  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  93 

Execution  of  trust  deed  (in  case  of  bonds). 

Underwriting. 

Marketing. 
Regulative  agencies  may  require  official  validation  of  securities 

by  certificate  of  convenience  and  necessity  or  otherwise. 
The  exchange  of  securities  in  course  of  consolidation  is  frequent. 
Stock  dividends  and  stock  and  bond  bonuses  have  been  popular 

ways  of  watering  capitalization. 

Haney,  pp.  301,  312.     La  Salle,  pp.  179-182.     Morris,  p.  215. 
Cleveland  &  Powell,  Railroad  Finance,  pp.  17,  23-27,  277. 
Johnson,  pp.  86-95. 
4.  The  nature  of  securities  and  conditions  of  marketing  are  largely 

determined  by  the  stage  of  development  and  the  pecuniary 

position  of  the  company. 
Three  stages  are  experienced  in  the  development  of  a  railroad: 

The  period  of  promotion  and  construction. 

The  period  of  growth  of  organization  and  traffic. 

The  period  of  maturity  and  normal  operation. 
The  pecuniary  position  of  a  railroad  company  may  be  specula- 
tive, prosperous,  unsound,  or  insolvent. 
Morris,   pp.    178-187.     Cleveland   &   Powell,   Railroad   Finance, 

pp.  50-52,  81-87.     Sakolski,  Chap.  1. 

(e)  Railway  corporations  are  so  organized  as,  theoretically, 
to  give  every  holder  of  common  stock  a  voice  in  the  management 
.and  place  the  control  with  the  majority  of  shares. 

1.  A  board  of  directors  is  selected  from  the  stockholders  by  cumu- 

lative or  non-cumulative  voting  of  the  shares. 

2.  The  directors  select  a  chairman  of  the  board,  an  executive  com- 

mittee, a  president  (who  is  usually  chairman  of  the  board  and 
of  the  executive  committee),  and  administrative  officers  in- 
cluding several  vice-presidents,  the  general  managers,  gen- 
eral superintendents,  and  the  chief  legal  and  financial  officials. 

3.  Subordinate  officers  are  usually  appointed  by  their  superiors 

subject  to  approval  by  a  general  officer  or  the  executive  com- 
mittee. 

4.  Vice  presidents  are  usually  general  officers  in  charge  of  depart- 

ments or  divisions. 

Wood,  pp.  137-138.     Morris,  pp.  29-30.     Haney,  pp.  261- 
263. 

(f)  Corporate  integration  has  characterized  railway  organiz- 
ation since  the  days  of  the  consolidation  of  the  original  end-to- 
end  railway  lines  of  the  East. 


94  THE   UNIVERSITY   OF  WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  95 

Recent  activities  of  the  United  States  Department  of  Justice 
seem  to  have  effectually  checked  the  progress  of  corporate  integra- 
tion. 

1.  Consolidation  involves  the  bringing  together  of  two  or  more 

corporate  properties  under  one  management  by  the  processes 
of  amalgamation  and  merger. 

2.  Intercorporation  brings  together   several  corporate  properties 

by  means  of  the  liolding  company,  interlocking  directorates, 
and  corporate  federation. 

By  the  holding  company  plan  the  "controlling  interest"  (ruling 
aggregate  of  voting  shares)  in  each  associated  or  subsidiary 
company  is  owned  by  a  supernatant  corporation. 

Holding  companies  may  be  pyramided  one  above  others.  They 
may  confine  their  activities  to  matters  of  control,  or  may 
also  conduct  railway  operations. 

Interlocking  directorates  make  it  possible  for  a  coterie  of  indi- 
viduals, each  a  stockholder  in  several  of  the  associated  cor- 
porations, to  dominate  the  respective  boards  of  directors  and, 
by  united  action,  control  the  policy  of  the  group  as  a  unit. 

Federation  indicates  united  action  of  associated  or  autonomous 
corporations,  resulting  in  pools,  rate  and  traffic  agreements, 
and  standardization  of  policies. 

Morris,  pp.  256-262.  Haney,  pp.  145,  207-208,  216,  222, 
238-243,  130-131.  La  SaUe,  pp.  211-223.  Cleveland 
&  Powell,  Railroad  Finance,  Chap.  16,  p.  278.  Harper's 
Weekly,  Vol.  58,  p.  29 ;  Vol.  56,  p.  22.  Literary  Digest, 
Vol.  45,  p.  1107;  Vol.  47,  p.  844. 

(g)  Co-industrial  affiliation  between  railway  companies,  ex- 
press and  steamship  companies,  funding  institutions,  and  in- 
dustrial corporations  greatly  influences  financial  and  industrial 
affairs  generally,  and  determines  in  large  measure  the  develop- 
ment, organization,  and  policy  of  railwa; 

1.  The  affiliation  of  railway  companies  and  banks  is  necessary  to 

the  financing  of  railway  projects.  An  indirect  influence  upon 
conditions  of  investment  and  industrial  and  commercial  en- 
terprise may  thus  be  exercised. 

2.  Affiliation  with  express  and  steamship  companies  has  effected 

a  centralization  of  shipping  interests  which  presents  certain 
serious  phases  of  the  so-called  "trust  problem.*' 

3.  Affiliations  of  railroads  and  industrial  corporations  have  consti- 

tuted the  chief  cause  of  discrimination,  assuming  in  some 


96  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION 


97 


cases  the  proportions  cf  "conspiracy  in  restraint  of  trade," 
and  becoming  the  basis  of  current  discussion  as  to  the  reas- 
onableness of  discrimination  and  restraint  of  trade. 


INTERCORPORATE    AND   CO-INDUSTRIAL   RELATIONS  OF   J.    P.    MORGAN    &    CO. 
AFFECTING   A   CAPITALIZATION    OF  $22,250,000,000      (1912) 


Center  of 
influence 


Partnership 

and  syndicate 

associates 


Media  of 
financial 
influence 

'New  York 
*National  City  Bank 
*First  National  Bank 
•Guaranty  Trust  Co. 
•Bankers'  Trust  Co. 


Sphere  of 

commercial 

and  industrial 

influence 


29  Railroad  Companies 

Boston 

rKuhn,  Loeb  &  Co. 

First  National  Bank 
National  Shawmut  Bank 

(New  York) 

Old  Colonial  Trust  Co. 

34  Bank  and  Trust 

Companies 

Philadelphia 

Fourth  St.  National  Bank 

Franklin  National  Bank 

Philadelphia  National  Bank 

24  Producing  and 

Girard  Trust  Co. 

Trading  Compa- 

nies 

J.  P.  Morgan      Lee  Higginson  &  Co. 

Pittsburg 

*              j  KM  .'er,  Pea  body  &  C'o.    |      Mellen  National  Bank 
Company  *                   (Boston)                        Union  Trust  Co. 
(New  York) 

11  Traction,  Lighting, 

Chicago 

and  Power  Compa- 

- 

First  National  Bank 

nies 

Continental  and  Commer- 

cial National  Bank 

Illinois  Trust  &   Savings 
Bank- 

10  Insurance  Compa- 

Drexel &  Co. 
(Philadelphia) 

Merchants  Loan  and  Trust 
Company 
First  Trust  and  Savings 
Bank 

nies 
2  Telephone  and  Tele- 
graph Companies 
2  Express  Companies 

.  1  Steamship  Company 

Washington 
American  Security  Trust 

Co. 
Riggs  National  Bank 


*  The  sixty-five  men  who  constitute  the  boards  of  directors  of  the  Guaranty  Trust  Company, 
the  Bankers'  Trust  Company,  the  First  National  Bank  of  New  York  and  the  National  City  Bank, 
inc"u<iing  the  eleven  partners  of  J.  P.  Morgan  <fc  Co..  hold  over  340 directorships  in  113  industrial 
and  commercial  corporations  indicated,  and  over  1,000  directorships  in  subsidiary  corporations. 

Connections  of  London  and  Paris  associates,  through  J.  S.  Morgan  &  Co.  and  Baring  Bros. 
in  London,  and  Morgan,  Harjis  &  Co.,  Paris,  are  not  indicated  here. 

Morris,  pp.  196-201.  LaSalle,  pp.  224-229.  Ripley,  pp. 
513-514.  553-554.  Cleveland  &  Powell,  Railroad  Fi- 
nance, pp.  279-282.  Report  on  Steamship  Agreements 
and  AffiliationSj  pp.  317-330.  409.  In  re  Express  Rates, 
24  I.  C.  C.  Reps.  385.  Pujo  Committee  Report,  pp.  89, 
129-166,  and  appendices. 


98  THE   UNIVERSITY   OF  WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  99 


PROBLEMS 

1.  In  1906,  The  Rock  Island  Company  was  a  holding  company 

capitalized  at  $138,405,682  and  owning  all  voting 
shares  of  The  Chicago,  Rock  Island  &  Pacific  Railroad 
Co.,  which  was  capitalized  at  $145,000,000. 

The  Chicago,  Rock  Island  &  Pacific  Railroad  Co.  held  93 
per  cent  of  the  voting  stock  of  The  Chicago,  Rock  Island 
&  Pacific  Railway  Co.  which  owned  SO1/^  per  cent  of 
the  stock  of  The  Chicago  &  Alton  Railroad  Co. 

The  Chicago,  Rock  Island  &  Pacific  Railroad  Co.,  also  held 
53  per  cent  of  the  stock  of  the  St.  Louis  &  San  Francisco 
Railroad  Co.;  the  St.  L.  &  S.  F.  R.  R.  Co.  owned  84 
per  cent  of  the  stock  of  The  Chicago  &  Eastern  Illi- 
nois Railroad  Co.,  and  the  C.  &  E.  I.  owned  61  per  cent 
of  the  stock  of  The  Evansville  &  Terre  Haute  Railroad 
Co. 

Construct  a  chart  indicating  the  intercorporate  relations 
involved  and  the  centralization  of  control  in  one  board 
of  directors. 

2.  From  the  Table  below  construct  a  chart  indicating  the  in- 

terlocking directorates  established  through  the  thirteen 
directors  of  the  New  York  Central  and  sixteen  associ- 
ates in  the  management  of  forty-four  eastern  railroads. 
The  chart  should  indicate  the  roads  under  direct  control  of 
the  New  York  Central  and  those  within  its  "sphere  of 
influence." 


100  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION 


101 


INTERLOCKING  DIRECTORATES   OF  THE    NEW  YORK  CENTRAL  SYSTEM   IN  EASTERN 

TERRITORY      (1912) 


Eastern  Railway 
No.              Corporations 

New  York  Central 
Directors 

Directorships  Held 
(Indicated  by  No.) 

1.    New  York  Central 

Vanderbilt,  W.  K. 

1,  5,  6,  8,  9,  11 

2.    Boston  &   Albany 

Hughitt,  MarvL) 

1.  5,  6,  9 

3.    Toronto  H.    &  Buffalo 

Vanderbilt,   W.  K.,  Jr. 

1,  2,  4,  5,  6,  7,  8,  9,  11,  17 

4.    Rutland  i                                i  Bowdoin,  Geo.  S. 

1 

5.    Michigan    Central                     Newman,  W.  K. 

1,  3,  4,  5,  6,  7,  8,  9,  11,  12,  15,  17 

6.    Lake  Shore  &  Mich.  So.    !  Depew,  Chauncey  M. 

1,  5,  6,  8,  9,  11 

7.    Chicago,  Ind.,  &  So.             Yanderbilt,  F.  W. 

1,  5,  6,  8,  9,  11 

8.    Lake  Erie  &  Western 

Brown,  Wm.  C. 

1,  3,  4,  5,  6,  7,  8,  9,  10,  11,  12,  17, 

00 

9.    N.  Y.,  Chicago,    &  St.  L. 

Ledyard,  Lewis  C. 

1,  4,  5,  6,  8,  9,  11,  13,  17 

10.    Kanawha  &   Mich.2 

Stillman,  Jas. 

1,  4,  5,  6,  9,  11,  17,  24,  25,  43 

11.    Cle.,  Cin.,  Chi.,  &  St.  L. 

Rockefeller,  Wm. 

1,  4,  5,  6,  8,  9,  11,  13,  17,  18,  19, 

43 

12.    Cin.  &  Northern 

Morgan,  J.  P. 

1,  4,  5,  6,  8,  9,  11,  13,  17,  18,  19, 

21,  22 

13.    New  Haven 

14.    Dayton  &  Union  3 

Baker,  Geo.  F. 

1,  4,  5,  6,  8,  9,  11,  13,  17,  30,  31, 

15.    Toledo    &  Ohio  Central 

32,  33,  34,  43,  44 

17.    Rutland  l 

18.    Central  New  England                               Directors  of 

19.    N.  Y.,  Ont.,   &  Western 

Subsidiary  Lines 

.20.    Boston  R.  R.  Holding  Co.5 
91      Boston   &   AlflliiG 

22'.    Maine  Central 

23.    St.   J.    &   L.  C. 

Lewis,   Chas.   T. 

15,  16 

24.    Baltimore  &  Ohio 

Kelly,  L.   D. 

15,  16 

25.    B.  &  O.  Southwestern 

Webb,  W.  Stewart 

4,  6 

26.    Cin.,  Ham.,   &  Dayton 

Cox,  C.  F. 

3,  14,  27 

27.    Dayton  &  Union  3 

Van  Winkle,  J.  A. 

10,  14,  27,  38 

28.    Staaten  Island 

Ingalls,  M.  E. 

11,  12,  14,  27 

29.    Washington   Terminal* 

Schaff,  C.  E. 

7,  10,  12,  14,  15,  27,  38 

30.    Reading  Co.5 

Mellen,  Chas.  S. 

4,  13,  18,  19,  20,  21,  22,  23 

31.    Philadelphia  &  Reading 

Skinner,  Wm. 

4,  13,  18,  19,  20,  21,  22 

32.    Jersey  Central 

Murray,  O.  G. 

12,  24,  25,  26,  27,  28,  29,  30,  31 

33.    Erie 

Ledvard,  H.  B. 

3,  5,  44 

34.    N.  Y.,  Susq.,   &  Western 

Field,  J.  S. 

7,  41 

35.    Chesapeake  &  Ohio  6 

Stevens,  G.  W. 

9,  35,  36,  37,  38 

36.    C.  &  O.  of  Indiana 

Trumbull,  Frank 

10,  35,  36,  37,  38 

37.    Hocking  Vallev 

Reynolds,  S.  C. 

10,  37,  38,  39 

38.    Kanawha  &  Mich.2 

Cotter,  Wm. 

14,  27,  44 

39.    Wabash  6 

40.    Wheeling  &  Lake  Erie 

41.    Chi.,  Terre  Haute  &  S.  E. 

42.    Delaware  &  Hudson 

43.    Del.,    Lack.,    &   Western 

44.    Pere  Marquette 

Joint  control  by  New  York  Central  and  New  Haven  systems. 

Joint  control  by  New  York  Central  and  C.  &  O.  systems. 

C.  H.  &  D.  controls  53% 

Joint  control  by  B.  &  O.  and  Pennsylvania  systems. 

Holding  companies. 

Not  in  eastern  territory  but  controls  eastern  roads. 


***»•«•  «•**  -  *•  v  " 
102  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  103 


CHAPTER  XII 
PURPOSES  AND  METHODS  OF  REGULATION 

(a)  Regulation  is  the  expression  of  the  public  will  in  matters 
of  railway  administration  under  a  regime  of  private  ownership. 

The  necessity  for  regulation  arises  from  the  public  nature  of 
the  railroad  business  and  the  characteristic  attribute  of  self- 
interest  which  is  dominant  in  the  management  of  private  busi- 
ness corporations. 

1.  When  private  self  interest  does  not  harmonize  with  intelligent 

public  policy  a  salutary  co-ordination  may  be  effected  by 
regulation. 

2.  Private  initiative  is  permitted  to  conduct  railway  operations 

for  pecuniary  gain,  but  regulative  agencies  are  necessary  to 
confine  railway  activities  within  their  proper  field  of  public 
service. 

Johnson,  p.  359.  Meyer,  pp.  20-30.  La  Salle,  pp.  8-10.  An- 
nals Am.  Acad.  of  Pol.  and  Soc.  Sci.j  Vol.  5,  pp.  909- 
913.  Beale  &  Wyman,  pp.  iii-iv. 

(b)  Regulative  measures  have  generally  contemplated  definite 
objects  pertaining  to  the  respective  welfare  of  railway  patrons, 
railway  owners,  railway  employees,  and  the  general  public. 

1.  The  primary  object  of  regulation  i&  reasonable  service  to  pa- 

trons upon  a  standardized  basis  of  equality. 

2.  Adequate  compensation  to  railway  operators  and  investors  is 

an  object  of  regulation. 

3.  Intelligent  regulation   should  correlate  railway  policies  with 

business  policies  which  obtain  in  other  spheres  of  private  and 
public  activity. 

La  Salle,  pp.  86-91,  95,  190-191.  Meyer,  pp.  40,  43,  117, 
126,  129,  136,  145,  148,  151,  162. 


104  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  105 

(c)   Agencies  of  regulation  include  legislative  bodies,  admin- 
istrative agents,  the  courts,  and  "public  opinion". 

1.  Legislative  powers  are  primary  in  all  matters  of   regulation, 

but  administrative  and  judicial  agents  are  necessary  to  make 
effective  the  "legislative  will." 

The  legislative  will  may  be  expressed  in  constitutional  provi- 
sions, in  charters  granted  by  special  act  or  under  general 
law,  and  in  statutory  provisions  other  than  general  laws  of 
incorporation. 

Legislative  bodies  may  also  exercise  a  measure  of  control  by 
means  of  investigation  and  publicity. 

Legislative  powers  may  be  exercised  in  like  manner  by  federal, 
state,  and  municipal  bodies,  each  acting  within  its  own 
sphere  and  with  considerable  overlapping  of  jurisdiction. 
La  Salle,  pp.  79-93,  97-101,  106-108.  Raper,  pp.  246-247,  469, 
247-249.  Johnson,  pp.  349-353.  Meyer,  pp.  53,  81,  97-107. 
Beale  &  Wyman,  sec.  1302,  1309-1310. 

2.  Administrative  agents  are  theoretically  vested  with  power  to 

enforce,  with  the  assistance  of  the  courts,  the  legislative  will 
as  expressed  in  the  law. 

The  will  of  the  legislature  may  be  expressed  in  general  terms, 
as  to  methods  of  regulation;  administrative  bodies  being 
created  and  authorized  to  specify  within  such  general  terms 
and  to  take  regulative  action  accordingly. 

Two  types  of  administrative  bodies  are  recognized,  i.  e.  constitu- 
tional officers  and  administrative  commissions.  Adminis- 
trative commissions  may  be  vested  with  mandatory  power  or 
with  advisory  authority  only. 

Commission  control  has  recently  assumed  the  attitude  of  critical 
and  corrective  supervision  of  the  railroad  business. 

The  wide  powers  conferred  upon  modern  administrative  com- 
missions are  relatively  new  attributes  of  representative  gov- 
ernment. 

Raper,  pp.  249-251.  Johnson,  pp.  354-358,  362-366.  Meyer,  pp. 
37-47,  163-170.  Beale  &  Wyman,  sec.  1319.  LaSalle,  pp. 
79-105. 

3.  The  courts  exercise  regulative  powers  by  criminal  and  civil  pro- 

cedure following  the  provisions  of  constitutional  law,  statu- 
tory law,  and  common  law. 

The  necessity  for  and  objects  of  regulation  of  public  service 
agencies  have  been  tenets  of  the  common  law  from  the  be- 
ginning. 

Actions  contemplating  the  regulation  of  public  service  corpora- 


106  THE   UNIVERSITY   OF  WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  107 

tions  may  be  undertaken  in  the  courts  by  formal  complaint, 
usually  following  injury,  and  results  are  punitive  rather  than 
directive. 

Acts  of  legislative  bodies  and  of  administrative  bodies  are  sub- 
ject to  tests  as  to  legality  by  the  courts  (the  prerogative  of 
judicial  review). 

Judges  may  use  various  writs  of  injunction,  mandamus,  etc.  in 
the  exercise  of  regulative  power. 

La  Salle,  pp.  108-137.     Ripley,  pp.  503-506.     Johnson,  pp.  386- 

407. 
4.  "Public  opinion"  is  a  growing  power  in  the  determination  of 

railway  policy. 

Public  opinion  is  made  effective  by  the  public  press,  the  initia- 
tive and  referendum,  and  expression  of  personal  disapproval 
resulting  in  social  ostracism. 
La  Salle,  pp.  82,  92,  93,  103,  146.     Raper,  p.  253.     Johnson,  p. 

384.     Ripley,  pp.  484-486,  642. 

(d)  Several  unsolved  problems  arise  from  the  conflict  of 
authority  and  overlapping  jurisdiction  of  concurrent  regulative 
bodies. 

pp.  627-638.    La  Salle,  pp.  137-138. 


QUESTIONS 

1.  In  what  ways  may  private  self  interest  in  the  railroad  busi- 

ness tend  to  contravene  beneficent  public  policy — 
In  the  construction  of  railways? 
In  fixing  rates  and  fares? 
In  the  disposition  of  earnings? 
In  the  issue  of  securities,  and  the  disposition  of  pro- 
ceeds ? 

In  practices  associated  with  corporate  integration? 
In  the  appraisal  or  valuation  of  railway  properties? 

2.  Why  may  regulative  action  in  the  interests  of  railway  em- 

ployees be  desirable? 

What  suggestions  can  you  make  as  to  the  methods  of 
effecting  such  regulations? 

3.  Why  may   regulative    action  in  restraint    of  railway  em- 

ployes be  desirable? 

What  suggestions  can  you  make  as  to  methods  of  such 
restraint  ? 


108  THE    UNIVERSITY    OP   WISCONSIN 


AMERICAN   RAILWAY    TRANSPORTATION  109 

4.  Give  as  many  reasons  as  you  can  why  the  old  regulative 

procedure  of  legislative  enactment,  complaint  of  injury, 
and  law  suit  between  complainant  and  railway  com- 
pany failed  to  regulate  effectively. 

5.  Why  do    advisory    commissions    prevail  in  the    East  and 

mandatory  commissions  prevail  in  the  West? 


110  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  111 


CHAPTER  XIII 

RAILWAY    REGULATION    IN    THE    UNITED    STATES 
PRIOR  TO  1906 

(a)  Prior  to  1870,  railways  in  the  United  States  were  sub- 
ject to  few  restrictions  other  than  those  contained  in  extraordin- 
arily liberal  charters  and  administered  by  lenient  public  officials. 
Railway  promotion  was  much  in  favor  with  the  public  and  reg- 
ulation was  largely  nominal. 

1.  Early  charters  were  usually  granted  in  perpetuity;   they  speci- 

fied manner  of  organization,  route,  and  period  of  construc- 
tion; conferred  broad  powers  and  recognized  no  reservation 
of  regulative  authority  to  the  legislature — they  conferred 
special  privileges  and  were  almost  silent  as  to  responsibil- 
ities. 

2.  Commissions  were  established   in  New   England  and  eastern 

states  between  1853  and  1870.  Their  activities  were  confined 
to  the  prevention  of  accidents,  appraisal  of  private  property 
taken  for  railroad  purposes,  and  the  enforcement  of  charter 
obligations. 

3.  The  general  neglect  of  the  public  interest  by  legislatures  in 

granting  special  charters  led  to  the  adoption  of  constitu- 
tional provisions  by  most  of  the  states  requiring  all  railway 
franchises  to  conform  to  general  laws.  Such  constitutional 
provisions  required  legislatures  to  incorporate  in  general 
laws  certain  restrictions  as  to  the  manner  of  public  aid  to 
railways  and  certain  reservations  of  future  legislative  power 
in  matters  of  rates  and  services. 

4.  European  charters  were  more  carefully  formulated  and  have 

thereby  made  court  regulation  abroad  more  successful  than 
in  the  United  States. 

5.  The  Dartmouth  College  Decision   (1819)   has  been  invoked  by 

the  railways  in  defense  of  their  early  charter  privileges. 
Many  railway  companies  have  been  forced  to  abandon  their  in- 
itial charter  privileges  upon  refusal  of  further  privileges  of 
extension,  reorganization,  or  benefit  of  subsequent  regulation. 


112  THE   UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  113 

6.  Modern  franchises  are  issued  under  authority  of  general  laws 
and  commission  supervision;  they  carefully  define  privileges 
granted  and  prescribe  reciprocal  obligations;  the  life  of  the 
grant  is  limited  subject  to  renewal,  and  wide  powers  of 
amendment  are  reserved  to  the  legislature. 

Meyer,  pp.  7-13,  18,  24-25,  53-79,  97-107,  80-96,  108,  110, 
111,  115,  117-118,  126,  129,  136,  145,  148.  Johnson, 
pp.  74,  349-353,  359. 

(b)  The   so-called    "Granger    Movement",    beginning   about 
1870,   inaugurated  a   35-year  period   of   experimental  railway 
regulation   by  the  states  which   culminated  in  a  more   or  less 
effective  regulation  of  intrastate  traffic  and  rates  through  the 
agency  of  the  modern  supervisory-mandatory  commission. 

1.  The  cause  of  the  granger  movement  was  a  combination  of  hard 

times,  local  discrimination  in  rates,  questionable  railway 
finance  and  political  activity,  evidence  of  railway  combina- 
tion and  cooperation,  a  misunderstanding  of  the  nature  of 
the  railway  business,  and  "absentee  landlordism". 

2.  Laws  were  enacted  by  the  states  which  prescribed   classifica- 

tions, rates  and  standards  of  service.  They  were  soon  found 
impracticable  and  were  repealed  in  a  few  years. 

3.  State  railroad  commissions  were  created  and  vested  with  wide 

discretionary  powers  in  the  determination  and  prevention  of 
inimical  railway  activities  and  large  authority  in  matters  of 
service,  rates,  and  methods  of  railway  finance. 

4.  The  endeavor  of  the  states  was  to  regulate  all  railway  activities 

within  their  respective  boundaries.  Such  powers  were  up- 
held for  a  time  by  the  Supreme  Court  of  the  United  States  in 
Peik  v.  Cliicuyo  and  XortJucestern  Ry.  (1877)  and  in  Munn  r. 
Illinois  (1876). 

5.  A  decision  of  the  Supreme  Court  in  1886  in  the  "Wabash  Case" 

reversed  the  Peik  and  Munn  cases  and  confined  the  jurisdic- 
tion of  the  states  to  intrastate  traffic. 

Ripley,  pp.  441-452.     Johnson,  pp.  353-370.     La  Salle,  pp. 

80-82. 

(c)  Federal  regulation  of  interstate  traffic  was  undertaken  in 
1887,  under  constitutional  powers  indicated  in  the  "interstate 
commerce  clause"  and  defined  in  the  Interstate  Commerce  Act. 

1.  The   unsuccessful   experience   of  the  states  in   their   efforts   to 
regulate   railroads,   and    the   recommendations   of   two    con- 

8 


114  THE   UNIVERSITY   OF  WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  115 

gressional  reports  as  to  needed  restraints,  together  with  the 
sweeping  victory  of  the  railways  over  state  regulation  in  the 
Wabash  decision,  were  significant  antecedents  of  federal  leg- 
islation and  the  creation  of  the  Interstate  Commerce  Com- 
mission. 

The  key  note  of  the  Windom  Report  (1874)  was  proposed  reduc- 
tion of  excessive  rates,  resulting  from  agreements  and  com- 
binations among  carriers,  by  enforced  competition.  (Sen. 
Rep.  307,  43rd  Cong.  1st  Sess.) 

The  main  charge  placed  against  railways  by  the  Cullom  Com- 

mittee  (1886)   was  "unjust  discrimination  between  persons, 

places  and  commodities."   (Sen.  Rep.  46,  49th  Cong.  1st  Sess.) 

2.  The  Interstate  Commerce  Act  was  modeled  after  the  English 

act  of  1854  and  the  Illinois  Railroad  Commission  Law: 

Unreasonable  and  exorbitant  charges  icere  forbidden. 

Unjust  personal  discrimination  teas  made  unlawful. 

Unreasonable  discrimination  beticeen  places  and  kinds  of 
traffic  was  made  unlawful 

The  long-and-short-haul  clause  composed  the  famous  sec- 
tion four. 

Any  contract  or  agreement  ini'olving  pooling  of  money  or 
traffic  icas  forbidden. 

A  commission  of  five  members,  appointed  by  the  President, 
icas  given  access  to  books,  power  to  require  reports  and  ex- 
amine witnesses,  and  general  authority  to  apply  the  law  sub- 
ject only  to  "judicial  review"  by  the  courts.  (Ripley,  pp. 


3.  Violations  became  frequent  soon  after  the  inauguration  of  the 

Interstate  Commerce  Law  and  the  Commission  was  shorn  of 

all  regulative  powers  of  consequence  through  the  exercise  of 

the  power  of  judicial  review  by  a  reactionary  and  pro-rail- 

way judiciary.     (Ripley,  pp.  456-486) 
Power  of  the  Commission  to  require  testimony  was  questioned 

and,  for  a  time,  denied  by  the  courts. 
Railway  defendants  were  permitted  to  withhold  evidence  until 

cases   were  heard   on   appeal  by  courts;    thus  transferring 

power  from  the  Commission  to  the  courts. 
Rate  control  was  withdrawn  from  the   Commission  by  denial 

by  the  courts  of  the  right  to  name  maximum  rates. 
This  regime  has  been  characterized  as  the  period  of  "emascula- 

tion of  the  law",  and  continued  in  effect  until  1906. 

4.  The  continued  failure  of  state  and  federal  agencigs  to  restrict 

railway  activities  in  pursuit  of  private  self  interest  and  to 
enforce  regard  for  public  interests  was  accompanied  by  ad- 


116  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  117 

vancing  freight  rates,  increased  discrimination,  and  centrali- 
zation of  railway  ^nanagement.  (Ripley,  pp.  487-492). 

Ripley,  pp.  450-452.  Johnson,  pp.  370-385.  La  Salle,  pp. 
91-105,  138-158. 

(d)  A  Supreme  Court  decision  in  the  Trans-Missouri  Freight 
Case    (1897)    applied  the   Sherman  "Anti-Trust   Law"   to   co- 
operative freight  associations    resulting   in  a  reorganization  of 
railway  associations. 

1.  The  Trans-Missouri  Freight  decision  supplied  a  strong  stimulus 
to  corporate  integration  by  prohibiting  agreements  between 
rival  roads. 

Meyer,  pp.  239-242.    Johnson,  pp.  245-247. 

(e)  The  Elkins  Law  of  1903  was  a  pro-railway  act  so  designed 
as  to  increase  the  power  of  the  Interstate  Commerce  Commission, 
but  in  such  a  way  as  to  accrue  mainly  to  the  benefit  of  the  car- 
riers. 

1.  The  Elkins  Act  made  published  tariffs  the  basis  of  all  rates, 

thus  preventing  the  loss  of  revenue  by  competitive  under-cut- 
ting by  rebates  and  secret  or  preferential  rates  on  the  part 
of  rival  companies,  and  making  conviction,  in  case  of  viola- 
tions, easier. 

2.  Favored  shippers  were  made  subject  to  punishment  as  well  as 

the  guilty  railroad. 

3.  Punishments  visited  upon  railway  companies  were  made  to  con- 

sist of  fines  running  to  the  corporation,  and  responsible 
agents  and  officers  were  made  immune  to  imprisonment  or 
personal  fines. 

Ripley,  pp.  492-499. 

QUESTIONS 

1.  What  arguments  may  be  advanced  in  support  of  the  pro- 
posal to  place  all  matters  of  railway  regulation  in  the 
hands  of  the  Interstate  Commerce  Commission  and  the 
federal  courts? 

In  your  opinion  what  should  be  the  proper  adjust- 
ment of  regulative  powers  as  between  state  and  federal 
regulative  bodies? 


118  THE    UNIVERSITY    OF   WISCONSIN 


.tf 


AMERICAN    RAILWAY    TRANSPORTATION  119 

2.  What  were  the  sources  of  power  which  enabled  railway 

managers  to  override  public  opinion  and  legislation,  as 
they  did,  prior  to  1906  ? 

3.  What  benefits,  if  any,  have  been  derived  from  the  anti- 

pooling  clause  of  the  Interstate  Commerce  Law? 

4.  Has  the  Anti-Trust  Law  of  1890  been  consistently  enforced 

against  railway  companies  since  1897?     Give  reasons 
for  your  answer. 


120  THE    UNIVERSITY    OF    WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  121 


CHAPTER  XIV 
RAILWAY   REGULATION   SJXCE   1906 

(a)  The  vitalizing  of  the  Interstate  Commerce   Commission 
and  the  very  effective  functioning  of  several  state  commissions 
since  1906  indicate  that,  after  thirty-five  years  of  experimenta- 
tion, substantial  regulation  is  rapidly  being  achieved. 

1.  The  failure  of  railway  managers  to  sense  the  rising  tempera- 

ture of  popular  disapproval  of  their  arrogant  policies,  the  at- 
tack of  President  Roosevelt  on  the  unfair  practices  of  com- 
mon carriers,  and  Senator  LaFollette's  exposition  of  the  "pro- 
gressive policy  of  regulation"  precipitated  a  series  of  virile 
legislative  acts  and  supporting  judicial  decisions. 

2.  The  Wisconsin   Railroad   Commission    Law   of  1905,   as   inter- 

preted by  the  courts,  constitutes  the  most  positive  and  inclu- 
sive regulative  measure  which  has  been  made  effective. 
The  law  gives  the  Commission  adequate  control  of  rates  and 
services,  supervision  of  organization  and  finances,  limits  the 
power  of  judicial  review  to  questions  of  law,  relieves  com- 
plainants from  costs  of  litigation,  reduces  delays  of  legal 
procedure,  and  places  the  burden  of  proof  upon  the  railroads 
in  case  of  alleged  violation  of  law. 

3.  Federal  legislation  in  1906,  supplemented  by  the  acts  of  1910 

and  1912,  and  strongly  supported  by  the  United  States 
Supreme  Court,  has  brought  to  realization  most  features  of 
regulation  contemplated  in  the  law  of  188'<. 

Ripley,  pp.  487-499. 

(b)  The  Hepburn  Act  of  1906  broadened  the  field  of  regula- 
tion and,  in  fact,  substituted  administrative  commission  control 
for  judicial  control. 

1.  Express  and  sleeping  car  companies,  pipe  lines,  combination 
rail-and-water  routes,  and  all  terminal  facilities  were  made 
amenable  to  the  Interstate  Commerce  Commission. 


122  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  123 

2.  Upon  complaint,  the  Commission   could  "determine  and  pre- 

scribe" maximum  rates,  establish  through  routes,  and  ad- 
just joint  rates.  Such  orders,  however,  were  ineffective  pend- 
ing court  delays  on  appeals. 

3.  The  imprisonment  penalty  was  again  imposed. 

4.  The  "commodity  clause",  designed  to  sever  transportation  from 

other  business  activities,  became  ineffectual  by  judicial  in- 
terpretation and  circumvention. 

5.  Publicity  of  accounts,  ineffectually  covered  by  previous  legisla- 

tion, was  made  mandatory. 

6.  Exemption  of  orders  of  the  Commission  from  judicial  review  in 

matters  other  than  points  of  law  was  made  definite  by  sup- 
porting decisions.  (The  Illinois  Central  and  the  Baltimore 
&  Ohio  cases — Ripley,  pp.  540-541). 

7.  The  "Immunity  Bath"  decision   (1906)   modified  the  procedure 

of  the  Commission  in  requiring  testimony.   (Ripley,  pp.  550). 
Ripley,  pp.  499-556. 

(c)  The  Mann-Elkins  Act  of  1910  reinforced  the  Interstate 
Commerce  Law,  as  amended  in  1906,  against  certain  means  of 
attack  in  the  courts  by  the  railroads,  extended  the  authority  of 
the  Commission,   and  provided  for  the  reorganization  of  the 
Commission's  legal  procedure. 

1.  Authority  to  suspend  rate  increases  pending  determination  of 

their  reasonableness  is  of  significance  in  three  respects. 

2.  The  Commission  is  granted  authority  to  investigate  and  prose- 

cute on  its  own  initiative. 

3.  The  revival  of  the  long-and-short-haul  principle  of  rates  and  re- 

cent judicial  approval  of  its  application  will  relieve  the  South 
and  West  from  much  unjust  discrimination  (Ripley,  pp. 
600-626). 

4.  Authority  to  make  a  "legal  classification"  of  freight  now  rests 

with  the  Commission. 

5.  Telegraph,  telephone,  and  cable  companies  are  now  subject  to 

commission  supervision. 

6.  The  prosecution   of   Interstate   Commerce   cases   on  appeal   is 

transferred  from  the  Commission  to  the  Department  of  Jus- 
tice. 

Ripley,  pp.  557-579. 

(d)  The  law  of  1910  authorized  the  appointment  of  a  Com- 
merce Court  for  the  review  of  the  Interstate  Commerce  Com- 


124  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  125 

mission's  orders,  and  to  handle  cases  arising  under  the  Elkins 
Law  or  touching  matters  of  publicity  of  accounts  and  facilities 
of  transportation. 

1.  The  impeachment  of  one  member  of  the  court  for  alleged  mal- 
feasance, and  the  unpopularity  of  the  decisions  of  the  court, 
most  of  which  have  since  been  reverssd  by  the  Supreme 
Court,  were  doubtless  responsible  for  the  failure  of  Congress 
to  appropriate  funds  for  the  support  of  the  court  beyond  the 
initial  two-year  period. 

Ripley,  pp.  580-594. 

(e)  In  lieu  of  party  platform  pledges  to  regulate  railroad  se- 
curities, a  Railway  Securities  Commission  was  appointed  in  1910 
to  ''investigate." 

1.  The  report  of  the  commission  (Nov.  1,  1911)  recommended  that 
the  government  refrain  from  the  regulation  of  security  is- 
sues, that  publicity  be  made  the  cure  for  all  financial  ills, 
and  that  a  physical  valuation  of  railway  properties  be  inaie 

Ripley,  pp.  573-577. 

(f)  In   1912  Congress  authorized  The  Interstate   Commerce 
Commission  to  make  a  physical  valuation  of  all  interstate  rail- 
ways and  common  carriers.    A  compilation  of  the  fiscal  history 
of  railways  was  also  provided  for. 

1.  The  valuations  arrived  at  are  to  be  prima  facie  evidence  in  all 
cases  before  the  commission. 

Review  of  Reviews,  Aug.  1913,  pp.  208-213. 

(g)  The  provision  of  the  Panama  Canal  Act  which  forbids 
the  use  of  the  canal  to  railroad-owned  vessels  will  require  the 
divorce  of  several  railways  from  their  steamship  lines.     It  is 
probable  that  this  will  be  effected  in  such  a  way  as  to  have  ho 
regulative  influence  of  consequence. 

Annals  American  Academy  of  Political  &  Social  Science, 
Sept.  1914,  pp.  17-47. 


126  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  127 


QUESTIONS 

1.  State  five  reasons  why  publicity  of  railway  accounts  is 

essential  to  adequate  regulation. 

2.  The  Wisconsin  law  provides  that  stocks  be  issued  at  par 

and  that  bonds  be  sold  at  not  less  than  75.  Discuss  the 
advantages  and  disadvantages  of  this  provision. 

3.  It  is  alleged  that  commission  supervision  of  railway  secur- 

ities will  discourage  capital  from  entering  the  business. 
Discuss. 

4.  The  Wisconsin  Railroad  Commission  exercises  regulative 

authority  over  steam  roads,  telegraph  and  telephone 
companies,  all  municipal  utilities,  and  water  powers. 
Discuss  the  advisability  of  placing  so  many  regulative 
functions  in  the  hands  of  one  commission. 


128  THE    UNIVERSITY    OF    WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  129 


CHAPTER  XV 

THE  ORGANIZATION  OF  THE  FREIGHT  AND  PASSEN- 
GER SERVICES 

(a)  Railway  organization  is  a  managerial  device  for  directing 
the  performance  of  railway  services  in  an  economical  and  expe- 
ditious manner. 

The  extent  and  complexity  of  the  railway  business  require  a 
thoroughly  efficient  and  highly  specialized  type  of  organization. 
Morris,  pp.  9,  11—15,  77.     Johnson,  pp.  184. 

(b)  The  general  corporate  organization,  which  includes  the 
executive,  secretarial,  legal,  and  financial  departments,  deals  with 
the  property  as  a  whole. 

1.  The  president  is  responsible  for  the  management  of  the  road  in 

its  entirety,  and  together  with  the  vice  presidents  and  gen- 
eral managers  (the  executive  department)  has  supervision 
over  all  branches  of  the  service. 

2.  The  financial  department  attends  to  the  financial  affairs  of  the 

general  corporate  organization  and  acts  as  fiscal  agent  for 
the  special  transportation  organization. 

Morris,  pp.  91,  109-113.    Johnson,  pp.  184-186. 

(c)  Within  the  general  corporate  organization  is  a  special  or- 
ganization for   the    performance    of   functions   peculiar  to  the 
railway  business,  i.  e.  the  carriage  of  goods  and  persons. 

1.  The  traffic  department  is  usually  headed  by  .a  vice  president. 
Under  him  is  a  traffic  manager,  under  whom  are  a  gen- 
eral freight  agent  and  a  general  passenger  agent.  Under  the 
general  freight  agent  are  division,  station,  and  fast  freight 
agents.  Under  the  passenger  agent  are  division,  ticket,  and 
baggage  agents. 

The  function  of  this  department  is  to  develop  and  hold  traffic  at 
remunerative  rates  and  fares:  to  solicit  business,  fix  classifi- 


13o  THE   UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  131 

cations,  rates,  fares,  settle  claims,  collect  charges  and  remit 
to  financial  department — in  general  to  adjust  the  relations 
between  carrier  and  patrons. 

2.  The  operating  department  is  usually  in  charge  of  a  vice  presi- 

dent. Under  him  is  a  general  manager,  under  whom  are 
chief  engineer,  superintendent  of  motive  power,  superinten- 
dent of  transportation,  and  purchasing  agent.  Under  these 
men  are  the  construction,  operation,  and  repair  forces. 

The  function  of  this  department  is  to  move  the  business  secured 
by  the  traffic  department. 

Three  distinct  operations  are  involved  in  the  performance 
of  this  function — 

The  engineering  department  constructs  and  maintains  the 
roadway. 

The  mechanical  department  constructs  and  maintains  the 
equipment. 

The  transportation  department  operates  the  equipment. 

3.  The  purchasing  functions  are  usually  of  such  magnitude  that 

they  are  segregated  and  placed  in  a  separate  department — 
the  purchasing  department. 

Morris,  pp.  50-51,  55,  76-77,  113-122,  95-109,  54.     John- 
son, pp.  184-190. 

(d)  Peculiar  traffic  conditions,  labor  considerations,  or  mere 
size  of  railway  systems  often  give  rise  to  special  departments. 

1.  Among  these  are  real  estate,  industrial,  agricultural,  mining,, 
coal,  insurance,  relief,  and  pension  departments. 

Johnson,  pp.  189-190. 

(e)  Operating  efficiency  is-  the  most  difficult,  as  well  as  the 
most  significant,  problem  in  railway  organization. 

1.  In  the  divisional  type  of  organization,  the  road  is  divided  into 

operating  units,  called  divisions,  and  the  division  superin- 
tendent is  given  full  control  over  operation. 

The  chief  engineer  and  the  chief  of  motive  power  set  the  stand- 
ards of  construction. 

The  traffic  and  financial  departments  have  some  elements  of  con- 
trol over  agents. 

2.  In  the  departmental  type  the  organization  is  spread  over  the 

whole  system.  The  superintendent  of  transportation,  the 
chief  engineer,  and  the  superintendent  of  motive  power  are 
given  full  authority  in  their  respective  fields.  Authority  con- 
verges upon  the  general  manager. 


132  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  133 

3.  The  divisional  type  proceeds  on  the  theory  that  efficiency  and 
economy  result  from  maintaining  the  advantages  of  small  or- 
ganization in  large  organization;  hence  the  divisions,  closely 
correlated,  but  with  large  local  autonomy. 

The  departmental  type  proceeds  on  the  theory  that  efficiency 
and  economy  result  from  giving  an  "expert"  full  control  in 
his  field;  hence  the  spreading  organization  with  convergence 
of  power  at  the  general  manager. 

Morris,  pp.  46-49,  63-65,  Chap.  4.    Haney,  pp.  278-280; 

(f)  The  relations  between  the  various  departments  and  offi- 
cials may  best  be  seen  from  a  chart  of  railway  organization. 
Practice  is  not  uniform,  but  the  general  principles  will  be  clear. 


134  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION 


135 


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136  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN   RAILWAY   TRANSPORTATION  137 


QUESTIONS 

1.  Discuss  the  relative  advantages  of  the  divisional  and  the 

departmental  types  of  organization. 

Change  the  Erie  organization  to  a  departmental  type. 

2.  What  steps  are  being  taken  to  improve  the  operating  effi- 

ciency of  railways? 

What  is  the  significance  of  this? 

3.  What  reasons  would  you  assign  for  the  prevalence  of  the 

divisional  type  of  organization  in  the  United  States 
and  the  departmental  type  in  England? 

4.  Explain  the  so-called  unit  organization.     (See  Morris,  Ap- 

pendix) . 


138  THE   UNIVERSITY   OF  WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  139 


CHAPTER  XVI 
THE  MAIL,  PARCEL  POST,  AND  EXPRESS  SERVICES 

The  Mail  Service 

(a)  The  primary  postal  function  is  the  rapid  transmission  of 
written  and  printed  intelligence. 

1.  This  function  is  of  fundamental  importance  in  social,  economic 

and  political  life. 

2.  The  growth  of  the  postal  service  is  an  indication  of  national 

progress. 
From   35,547    postoffices   and   277,873    miles   of   post   roads   in 

1875  the  postal  service  has  grown  to  58,020  postoffices  and 

450,000  miles  of  post  roads  in  1913. 
The  number  of  pieces  of  mail  handled  in  1912  was  16,863,426,385. 

This  represents  a  weight  of  1,607,242,420  pounds. 

Johnson,  pp.  170-171.  Tunell,  Railway  Mail  Service,  p. 
134.  Johnson  &  Huebner,  Vol.  2,  pp.  324-332.  Jour. 
Pol.  Econ.,  June  1914,  p.  524. 

(b)  Postal  rates  should  be  adjusted  so  as  to  secure  the  greatest 
degree  of  public  good. 

1.  Business   convenience,    promotion   of   public   intelligence,   and 

equalization  of  postal  receipts  and  expenditures  are  basal 

considerations  in  mail  classification  and  rates. 
There  are  four  classes  of  mail  including  parcel  post. 
The  educational  value  of  periodicals  is  the  usual  sanction  for 

carrying  second  class  mail  at  a  heavy  loss. 
The  justification  for  "franked"  congressional  mail  is  an  open 

question. 

2.  Domestic  mail  is  divided  into  classes  and  rates  fixed  as  follows: 

Classes  Rates 

First;  Written  and  sealed    2  cents  for  each  ounce. 

matter,      postal      and    1  cent  for  postal  and  post  cards. 

post  cards 
Second;    Periodical    publi-    1  cent  for  each  four  ounces. 

cations 
Third;         Miscellaneous    1  cent  for  each  two  ounces. 

printed  matter 
Fourth;    Domestic   parcel    1  cent  for  each  ounce. 

post,       all        mailable    Parcel  post  rates  apply  with  certain 

matter     not     included  important   exceptions. 

in      the      first      three 

classes. 


140  THE   UNIVERSITY   OF  WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  141 

3.  Foreign  mail,  under  Postal  Union  agreement: 

Classes  Rates 

First;  Letters  5  cents  for  first  ounce. 

3  eents  for  each  additional  ounce. 

Second;  Postal  cards  2  cents. 

Reply  cards  4  cents. 

Third;    Printed  matter  i  cent  for  each  two  ounces. 

Fourth;     Commercial    pa-  5   cents   for  first  ten   ounces. 

pers  1  cent  for  each  additional  two  ounces. 

Fifth;     Samples    of    mer-    2  cents  for  first  four  ounces. 

chandise  1  cent  for  each  additional  two  ounces. 

As  in  case  of  domestic  mail,  registration  fee,  in  addition  to  post- 
age, is  10  cents. 

The  Postal  Union,  formed  in  1874  for  the  purpose  of  securing 
uniformity  in  international  mail  classifications  and  postal 
rates,  includes  all  important  nations. 

4.  Foreign  mail,  under  special  agreements: 

With  England;  letters,  2  cents  per  ounce. 
With  Germany;  letters,  by  direct  steamer,  2  cents  per  ounce. 
With  Canada,  Mexico,  Cuba,  and  Panama;  domestic  rates  apply 
to  all  mail  matter,  except  commercial  papers  and  trade  sam- 
ples which  are  governed  by  Postal  Union  rates. 

Outlook,  Vol.  91,  p.  738.    Report  Postmaster  General,  1875, 
pp.  xiv-xvii,  114.     Official  Postal  Guide,  July  1914,  p.  130. 
Johnson,  181-182.    Johnson  &  Huebner,  Vol.  2,  pp.  342- 
349. 

(c)  In  the  transportation  of  mail  the  railways  occupy  the 
dominant  position. 

1.                Agency      Number  Length  in      Annual  Cost 

(1913)  miles        travel  miles 

Star  routes  . . .   12,432  157,705         84,780,388  $7,047,717 

Steamboat    244  31,012           5,385,730  762,947 

Railway  3,425  228,619       471,599,089  51,466,021 

(d)  The  railways  have  been  declared,  by  law,  to  be  post  roads. 
The  government  may,  therefore,  fix  service  requirements  and 
determine  the  rates  for  carrying  mail. 

1.  The  railroads  are  required  by  law  to  provide,  equip,  and  haul 

mail  cars  as  may  be  directed  by  Congress  and  the  Post  Office 
Department. 

They  are  also  required  to  perform  certain  duties  at  terminals 
and  stations. 

2.  The  maximum  rates  for  transporting  mail  are  fixed  by  Con- 

gress. 

The  Post  Office  Department  determines  the  actual  rates  based 
upon  weight,  distance,  and  number  of  railway  mail  cars. 


142  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  143 

3.  Payment  for  the  transportation  of  mail  should  be  based  upon 

the  cost  of  performing  the  service. 
(See  Tunell,  pp.  130-140.) 

4.  The  following  rate  schedule  is  now  in  force  — 

Average  weight  Rate  under  Intermediate 

of  mail  per  day  Rate  under  Act  May  12,  weights. 

over  whole  length  Act  of  March  1910.     Applies  $1  per  mile 

of  railway  in  pounds  2,  1907  to  land  grant  additional 

roads 
200     ...............       $42.75  $34.20 

200  to  500   ...................  ..........................     12 

500     ...............          64.12  51.30 

500  to  i;OTH)    .....  ......................................     20 

1,000    ...............         85.50  63.40 

1,000  to  1,500    ...........................................     20 

1,500    ...............       106.87  85.50 

1,500  to  2,000    ...........................................     20 

2,000    ...............       128.25  102.60 

2,000  to  3,500    .  ..........................................     60 

3,500  ...............         149.62  119.70 

3,500  to  5,000    ...........................................     60 

5,000     ...............       171.00  136.80 

5,000  to  48,000    ..........................................     80 

For     each     additional 

2,000    up    to    48,000         20.30  16.24 

For   each    2,000    over 


*land  grant  roads. 

Extra  pay  for  full  sized  post  office  cars:    two  trips  per  day. 
Length  of  car.  Rate  per  annum  per  mile  of  track 

in  feet 

40    ................................................  $25.00 

45    ................................................     27.50 

50    ................................................     32.50 

55    ...........................  .....  .................     40.00 

Johnson  &  Huebner,  Vol.  2  pp.  333-340.    Rep.  Post  Office 
Dept.,  1911,  p.  135;  1913,  p.  21. 

THE  PARCEL  POST 

(a)  The  parcel  post  was  established  in  the  United  States  in 
1913  after  many  years  of  opposition  on  the  part  of  the  express 
companies  and  retail  merchants'  associations. 

1.  The  express  companies  had  a  monopoly  of  the  parcel  business. 

2.  The  retail  merchants  feared  the  mail  order  houses. 

Parcel  Post  Hearings,  Vol.  2,  1912,  pp.  404,  513.    Outlook, 
Vol.  96,  p.  794. 


144  THE   UNIVERSITY   OF   WISCONSIN 


-  :  v    ; 


AMERICAN    RAILWAY   TRANSPORTATION  145 

(b)  The  function  of  the  parcel  post  is  to  promote  social  wel- 
fare by  providing  the  most  efficient  service  possible,  consistent 

with  cost,  in  transporting  certain  categories  of  goods. 

1.  This  is  essentially  a  time-freight  function,  which  private  enter- 

prise has  failed  to  perform  satisfactorily. 

2.  To  perform  its  function  the  parcel  post  must  be  universal. 

•  3.  One  of  the  most  important  results  of  the  parcel  post  is  the  eco- 
nomic articulation  of  rural  and  urban  districts. 
4.  The  parcel  post  exercises  a  corrective  influence  on  the  express 

companies. 
Jour.  Pal.  Econ.,  June  1914,  p.  526. 

(c)  Social,   economic,  political,  and   physical   conditions  de- 
termine the  nature  of  the  parcel  post  service. 

1.  The  American  parcel  post  has  all  the  features  of  foreign  sys- 

tems;   but  in  many  European  countries,  notably  Germany, 
rates  are  lower  and  maximum  weights  higher. 

2.  The  features  of  the  American  service  are — 

Weight  of  parcels: 

First  and  second  zones;   50  pounds. 
Third  to  eighth  zones;    20  pounds. 

Maximum  size  of  package  72  inches  in  length  and  girth  com- 
bined. 

Insurance:  up  to  $25,  5  cents;  $25  to  $50,  10  cents. 

Special  delivery  fee  10  cents. 

C.  O.  D.  service  up  to  $100,  fee  10  cents  (includes  insurance 
up  to  $50). 

3.  The  following  rates  are  in  force — 

each 

Zone                                                          first  additional  highest 

No.                                                          pound               pound  charge 

Rural  and  city  delivery 05     (.05)  .01*   (.01)  .30 

1.  up  to  50  miles 05     (.05)  .01     (.03)  .54 

2.  50  to  150  miles 05     (.06)  .01     (.04)  .54 

3.  150  to  300  miles 06     (.07)  .02     (.05)  .44 

4.  300  to  600  miles  07     (.08)  .04     (.06)  .83 

5.  600  to  1,000  miles 08     (.09)  .06     (.07)  1.22 

6.  1,000  to  1,400  miles 09     (.10)  .08     (.09)  1.61 

7.  1,400  to  1,800  miles 11     (.11)  .11     (.10)  2.01 

8.  over  1,800  miles 12     (.12)  .12     (.12)  2.40 

Rates  in  parentheses  formerly  in  force. 

*Each  additional  two  pounds. 

Jo  Mr.  Pol.  Econ.,  June  1914,  pp.  509-519.  Hep.  Post  Office 
Dept.,  1913,  pp.  9-15.  Parcel  Post  in  Foreign  Coun- 
tries, Sen.  Com.  on  P.  0.  &  Post  Roads,  1912. 

10 


140  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  147 

(d)  The  payment  to  the  railways  is  on  precisely  the  same 
basis  as  payment  for  regular  mail  service. 

1.  The  adjustment  of  July  1913  allowed  an  increase  not  to  exceed 
5%  of  contract  terms  to  railways  not  weighed  since  January 
1913. 

(e)  The  policy  of  the  government  in  the  administration  of 
the  parcel  post  has  been  increased  efficiency  at  lower  rates.    As 
rapidly  as  regulations  have  become  restrictions  they  have  been 
changed. 

1.  Among  the  more  important  changes  are  the  increase  in  weight 
from  11  to  50  and  20  pounds  according  to  zones,  the  lowering 
of  rates  (see  c  3.),  the  addition  of  special  delivery  and  C. 
O.  D.  service,  and  constituting  post  offices  intermediaries 
in  the  sale  of  rural  produce. 
Jour.  Pol.  Econ.,  June  1914,  p.  520. 

% 
THE  EXPRESS  SERVICE 

(a)  The  express  business  is  an  American  institution.  In 
foreign  countries  "express  services"  are  performed  by  other 
agencies. 

1.  The  chief  service  of  the  express  companies  is  the  carriage    of 

perishable  goods  and  goods  of  small  bulk  and  high  value. 

2.  Other  functions  are  C.  O.  D.,  order  and  commission,  and  bank- 

ing. 
Johnson  &  Huebner,  Vol.  2,  pp.  275-278. 

'(b)   Consolidation   and   inter-corporation   have   characterized 
express  companies  since  their  inception,  1839. 

1.  Inter-express  and  inter-express-railway  stockholding  and  agree- 

ments, banking  relations,  and  community  of  interest  in  gen- 
eral have  practically  eliminated  competition  from  the  express 
business. 

2.  The  five  leading  companies  operate  over  218,367  miles  of  rail- 

way. 

The    six    next    most    important    companies    operate    over    only 
36,431  miles  of  railway. 

3.  This  monopoly  position  has  resulted  in  many  abuses.  The  most 

flagrant   are    discrimination,   extortionate   charges,    and   ar- 
bitrary rules  of  service. 
In  re  Express  Rates,  24,  7.  C.  C.  Reps.  385,  435,  463. 


148  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  149 

(c)  The  principle  underlying  classification  and  rates  is  mon- 
opoly price. 

1.  The  chief  classifications  are  merchandise  and  general  specials. 

2.  Rates  are  quoted  from  100-pound  and  graduate  scales.     Gen- 

eral specials  take  pound  rates. 

Johnson  &  Huebner,  Vol.  2,  pp.  297-312,  24  I.  C.  C.  Eeps., 
388,  407,  427. 

(d)  Business  relations  between   railways  and  express  com- 
panies are  fixed  by  exclusive  contract. 

1.  The  railway  company  agrees  to  furnish  sufficient  transporta- 

tion and  to  consider  certain  categories  of  goods  as  express. 

2.  The  express  companies  agree  to  maintain  rates  from  1%  to  2 

times  freight  rates  and  to  pay  from  40  per  cent  to  60  per 
cent  of  gross  earnings  to  the  railways. 

Johnson  &  Huebner,  Vol.  2,  pp.  270-274.     24  I.  C.  C.  Reps., 
455. 

(e)  The  express  function  is  a  social  service.     The  existence 
of  express  companies  is  justified  only  so  long  as  they  can  furnish 
the  service  at  the  least  social  cost. 

1.  Express  companies  are  parasitic. 

Absorption  of  express  functions  by  the  parcel  post  or  by  the 
railroads  would  eliminate  duplication  of  plant  and  therefore 
lessen  the  social  cost  of  the  express  service. 

2.  Consolidation  and  inter-railway  relations  have  made  the  ab- 

sorption of  express  companies  by  the  railways  a  matter  of 
expediency. 

Commission  control  of  the  railway-express  contract,  by  reduc- 
ing the  profits  to  the  railways,  will  probably  accelerate  an 
existing  tendency  on  the  part  of  the  railways  to  take  over 
the  express  business. 

3.  The  Act  of  1906  placed  express  companies  under  the  supervision 

of  the  Interstate  Commerce  Commission. 

A  recent  rate  order  has  materially  lowered  charges  and  reduced 
discrimination. 

Johnson,  pp.  165-168. 


150  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN  RAILWAY  TRANSPORTATION  151 

QUESTIONS 

1.  Space,  instead  of  weight,  has  been  suggested  as  the  basis  of 

mail  pay.    Is  this  sound?    "What  will  be  the  probable 
effect  on  the  amount  of  mail  pay? 

2.  "What  has  been  the  effect  of  the  parcel  post  on  the  business 

of  the  retail  merchant  in  smaller  towns? 

What  is  the  relation  between  rate  and  zone  adjust- 
ments and  retail  business? 

3.  Construct  a  parcel  post  map  such  as  would  be  used  in  your 

home  town  and  quote  the  rate  on  a  15  pound  parcel  to 
St.  Louis. 

4?  Compare  this  rate  with  the  express  rate  for  the  same  places. 
Quote  also  the  express  rates  on  2  pounds,  50  pounds, 
and  100  pounds.  (See  Official  Classification). 


152  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  153 


CHAPTER  XVII 

THE    PULLMAN    SERVICE    AND   PRIVATE    CAR    COM- 
PANIES 

THE  PULLMAN  SERVICE 

(a)  One  of  the  chief  characteristics  of  American  passenger 
traffic  is  the  consistent  demand  for  a  superior  service. 

1.  This  service  began  in  1864  with  "Pullman's  Pioneer' . 

2.  At  the  present  time  the  Pullman  company  owns  and  operates 

5,000  cars  of  various  types  over  200,000  miles  of  railway. 

3.  The  Minneapolis,  St.  Paul  &  Sault  Ste.  Marie,  the  Chicago,  Mil- 

waukee &  St.  Paul,  the  Great  Northern,  and  the  New  York, 
New  Haven  &  Hartford  use  their  own  extra-fare  cars. 

Johnson  &  Huebner,  Vol.  2,  pp.  96-98,  107,  110. 

(b)  The  primary  reason  for  the  development  and  continu- 
ance of  the  Pullman  service  in  the  hands  of  an  outside  cor- 
poration is  the  resultant  mobility  of  service. 

1.  Density  and  regularity  of  traffic,  or  consolidation  of  lines  of  cor- 
related seasonality  of  traffic,  are  controlling  criteria  of  rail- 
way ownership  of  extra-fare  cars. 

Johnson,  pp.  146-7. 

(c)  Business  relations   between   railways   and   the   Pullman 
Company  are  controlled  through  exclusive  contracts. 

1.  These  contracts  vary  with  the  traffic  conditions  of  railroads. 

2.  Usually,  the  Pullman  Company  agrees  to  supply  needed  equip- 

ment, and  the  railways  to  pay  mileage  and  to  assume  certain 
responsibilities. 

Johnson  &  Huebner,  Vol.  2,  pp.  102-107. 


154  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  155 

(d)   The  functions  and  earnings  of  the  Pullman  Company  are 
matters  of  public  interest. 

1.  Pullman  fares  are  made  in  accordance  with  the  opportunistic 

what-the-tramc-will-bear  practice. 

2.  The  earnings  of  the  company  have  been  excessive.    Besides  pay- 

ing a  regular  dividend  of  8%,  $74,000,000  have  been  added 
to  capital  out  of  surplus  since  1898. 

3.  The  Hepburn  Act  gives  the  Interstate  Commerce  Commission 

control  over  rates  and  practices  of  the  Pullman  Company. 
A  recent  fare  controversy,  before  the  Interstate  Commerce  Com- 
mission, resulted  in  a  reduction  on  upper  berths  to  80  per 
cent  of  lower  berth  fares. 

Johnson  &  Huebner,  Vol.  2,  pp.  107-114. 

PRIVATE  CAB  COMPANIES 

(a)  The  economic  need  for  special  equipment  and  the  refusal 
of  the  railroads  to   supply  such  equipment  gave  rise  to  the 
private  car  service. 

1.  The  movement  of  such  commodities  as  meats,  fruits,  and  live 

stock  requires  special  equipment. 

2.  The  railways  refused  to  furnish  special  equipment  because  of 

the  expense  and  risk  of  the  venture,  seasonal  nature  of  the 
traffic,  opposition  of  established  business,  and  competition 
with  existing  equipment. 

3.  During  the  80's  many  private  car  lines  were  organized.     Con- 

solidations followed,  making  the  Armour  line  dominant.  (I. 
C.  C.  An.  Rep.  1904,  pp.  15-16.) 

Johnson  &  Huebner,  Vol.  1,  pp.   212-219.     Johnson,  pp. 
131-132. 

(b)  Business  relations  between  private  car  lines,   railroads, 
and  industrial  concerns  are  varied. 

1.  Usually  the  private  car  company  pays  the  regular  freight  rate, 

and  receives  mileage  (  %   to  1  cent). 

Often  contracts  are  entered  into  with  exclusive  or  commission 
features. 

2.  Private  cars  are  often  leased  to  private  concerns  for  a  fixed 

rental. 

Johnson  &  Huebner,  Vol.  1,  p.  220,  I.  C.  C.  An.  Rep.  1904, 
pp.  12,  47. 


156   "  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  157 

(c)  In  the  present  developmental  stage  of  American  traffic, 
private  car  companies  may  perform  a  valuable  social  service. 

1.  The  mobility  of  the  service  enables  private  car  lines  to  meet 

the  demands  of  seasonal  traffic. 

2.  Abuses  such  as  excessive  and  discriminatory  mileage  and  re- 

frigeration charges,  and  unfair  competitive  practices,  have 
been  notorious. 

3.  There  is  a  growing  tendency,  as  traffic  conditions  become  more 

settled,  for  railroads  to  supply  their  own  special  equipment. 

Johnson  &  Huebner,  Vol.  1,  pp.  229,  234,  238.     I.  C.  C.  An. 
Rep.,  1891,  p.  34,  1903,  pp.  12,  24-25,  1904,  pp.  14-15. 

FAST  FREIGHT  LINES 

(a)  The  delay  and  damage  in  trans-shipment  of  goods  due  to 
the  lack  of  through   transportation   facilities,    i.  e.,  long  lines, 
through  bills  of  lading,  and  interchange  of  cars,  led  to  the  or- 
ganization of  fast  freight  lines. 

1.  Among  the  first  fast  freight  lines  were  Kassan's  Despatch  in 

1855,  the  Star  Union  Lines  in  1856,  and  the  Empire  Line  in 
1865. 

2.  These  companies  owned  equipment,  solicited  traffic,  and  con- 

tracted with  the  railways  for  the  movement  of  cars. 
At  first  the  fast  freight  lines  fixed  rates,   paid  the  railroads 

a  fixed  sum  per  car  per  year,  and  received  mileage. 
Later  the  railways  fixed  rates  and  paid  the  fast  freight  lines 

commission,  mileage,  or  per  diem,  for  the  use  of  cars. 

Johnson  &  Huebner,  Vol.   1,   pp.   240-245.     Johnson,  pp. 
127-130. 

(b)  By   means    of  .construction    accounts,    preference    given 
cars,  and  exorbitant  mileage  or  commissions,  the  fast  freight 
lines  were  used  to  "milk"  the  railways. 

Johnson  &  Huebner,  Vol.  1?  pp.  246-247. 

(c)  Consolidation  made  it  possible  for  the  railways  to  absorb 
the  functions  of  the  fast  freight  lines. 

1.  By  1875  fast  freight  lines,  as  independent  concerns,  had  prac- 

tically disappeared. 

2.  They  were  succeeded  by  cooperative  lines  which  were  car  pools. 
Typical  of  these  is  the  Lehigh-Wabash  Despatch. 

Johnson  &  Huebner,  Vol.  1.  p.  246. 


158  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  159 

(d)  Fast  freight  lines  are  now  company  lines.  They  vary  all 
the  way  from  mere  departments  of  railways  to  separate  organ- 
izations subsidiary  to  the  railways. 

1.  As  Company  lines,  they  serve  as  trade  marks,  for  the  solicitation 
of  traffic,  and  as  accounting  departments,  thus,  in  a  measure, 
performing  the  functions  of  a  railway  clearing  house. 

Johnson  &  Huebner,  Vol.  1,  pp.  248-252. 


QUESTIONS 

1.  What  was  the  effect  of  the  rise  of  refrigeration  cars  on  the 

localization  of  industry? 

2.  In  1894  an  effort  was  made  by  the  railways  to  reduce  the 

mileage  paid  private  car  lines.    What  condition  in  the 
railroad  business  caused  this  effort  to  fail  ? 

3.  A  member  of  the  Interstate  Commerce  Commission  takes 

'the   ground  that  private  car  lines   are  wrong  in  prin- 
ciple.   Is  this  sound? 

4.  Illustrate  possible  means  of  discrimination  in  the  use  of 

private  cars. 

5.  What  is  the  significance  of  the  action  of  the  Harriman 

lines  in  establishing  fast  freight  lines  to  enter  the  fruit 
refrigeration  business? 


160  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  161 


CHAPTER  XVIII 
ELECTRIC  RAILWAYS 

(a)  Two  views  of  electric  railways  may  be  taken:  one  from 
the  engineering  or  physical  standpoint,  the  other  from  the 
standpoint  of  service  rendered. 

1.  Physical  construction 
Surface* 
Elevated-  Tr°"ey 


Subwav" 

Incline"  St°rage  battery 

2.  Service  rendered 
Urban 
Suburban 
Interurban 
Terminal 


(b)  The  functions  of  electric  railways  are  essentially  supple- 
mentary to  the  work  of  the  steam  roads;  however,  competition 
arises  in  some  fields  of  the  service. 

1.  Urban  and  suburban  systems  are  usually  operated  jointly  and 

perform  economic  and  social  service  by  — 
Supplying    passenger    transportation    from    business    to    resi- 

dence districts,  thus  relieving  congestion  in  urban  centers 

by  providing  better  living  conditions  through  cheaper  land, 

fresher  air,  and  better  light. 
Supplying  passenger  transportation  to  facilitate  business  trans- 

actions, education,  and  religion.  • 

Supplying   passenger   transportation   to  places  of  amusement, 

i.  e.,  parks,  beaches,  and  theatres. 


Several  interurbans  operate  with  gasoline  motor  cars. 
Usually  third  rail. 

11 


162  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  163 

In  the  larger  metropolitan  centers  these  services  are  usually  per- 
formed by  certain  combinations  of  surface,  elevated,  and  sub- 
way electric  railways. 

2.  Interurban    systems    provide    frequent   passenger   and   freight 

transportation  between  cities  and  villages.  They  act  in  many 
cases  as  feeders  to  the  steam  roads,  while  in  some  cases  they 
are  competitors  for  through  traffic. 

3.  Terminal   electric  railways   are   used  as   auxiliaries   to  steam 

roads  to  convey  trains  through  cities  to  terminals  without 
the  dirt  and  noise  accompanying  steam  traffic.  Operation 
through  long  tunnels  or  subways  has  made  electric  traction 
of  this  form  a  necessity,  and  parts  of  steam  roads  have  been 
electrified. 

(c)   Electric  railway  development  in  the  United  States. 
The  forerunners  of  the  present  street  railway  were  the  animal, 
cable,  and  steam  dummy  railways. 

1.  The  horse  and  mule  traction  system  were  developed  from  1850 

to  1890.  From  12  systems  in  1855  they  increased  to  769  in 
1890,  with  5,661  miles  of  track,  or  69  per  cent  of  the  street 
railway  mileage.  The  first  passenger  street  railway  oper- 
ated on  4th  Avenue  in  New  York  City  in  1830  (John  Mason 
Omnibus  car). 

2.  Cable  operation  began  soon  after  .1873  in  large  cities  having 

central  areas  with  a  high  density  of  traffic.  The  cable  systems, 
due  to  their  enormous  cost  of  construction  and  operation,  re- 
quired such  areas,  with  animal  and  steam  dummy  raihvays 
operating  as  feeders.  In  1890,  448  miles  of  cable  railway 
were  in  operation. 

3.  Steam   dummies  operated  mainly  as  urban-suburban  systems. 

In  1890,  711  miles  of  track  were  in  operation. 

Animal        Electric        Cable      Steam 

Track  mileage    69%  16%  6%  9% 

Passengers     60%  7%  19%         14% 

4.  A  long  period   of  experimentation    (1835-1888)    preceded    the 

first  commercially  successful  electric  railway. 
The  development  of  the  dynamo  and  electric  transmission  made 

electric  railways  commercially  possible. 
The  first  successful  electric  railways  were  the  Berlin  system  in 

1881  and  the  Richmond,  Va.  system  in  1888. 
Interurbans  became  commercially  successful  about  1894. 

5.  At  the  close  of  1888  there  were  30  electric  railways  in  operation. 

Their  rapid  growth  is  evidenced  by  the  fact  that  mileage  in- 
creased from  1,262  miles  in  1890  to  41,022  miles  in  1912. 


164  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  165 

6.  Consolidation  of  separate  urban  and  interurban  systems    has 

taken  place  to  a  large  extent  by  merger,  lease,  or  stock  own- 
ership. New  York  City,  Philadelphia,  and  Milwaukee  are 
typical  examples. 

7.  Terminal  and  trunk  line  electrification  is  practically  certain  to 

come  in  the  near  future. 

(d)  Passenger  fares  apply  to  urban,  suburban,  and  interur- 
ban traffic  and  differ  accordingly. 

1.  Urban  flat  fares  and  zone  fares — 

In  the  United  States  the  cash  fare  is  a  flat  rate  of  5  cents 
applicable  to  a  large  area.  Reduced  tickets  are  usually  in 
force  for  all  passengers  or  for  certain  classes  of  passengers 
(Cleveland  3  cent  fare). 

In  Europe  the  zone  system  of  fares  is  in  vogue  in  the  cities. 
Charges  are  proportional  to  the  distance.  This  system  has 
sociological  and  economical  disadvantages. 

2.  Suburban  cash  fares  in  the  United  States  are  on  a  5-cent  zone 

basis.     Commutation  fares  are  common. 

3.  Interurban  fares  are  of  three  kinds:   5-cent  zone,  2-cent  zone, 

and  mileage.  The  5-cent  zone  is  quite  common  but  is  highly 
discriminatory,  especially  when  combined  with  overlaps  and 
class  rates.  The  2-cent  zone  is  less  discriminatory  and  is  ap- 
plicable to  a  densely  populated  territory.  Mileage  cash  and 
book  fares  are  most  equitable.  Recently  inter-line  mileage 
books  and  tickets  have  appeared. 

(e)  Service  varies  with  conditions  and  purpose. 

1.  Urban  traffic  has  a  concentrated  peak  service.    The  double  deck 

car,  center  entrance  car,  unit  multiple  control,  skip-stop,  traf- 
fic surveys  of  car  routing,  study  of  passenger  habits,  etc., 
are  recent  measures  to  meet  peak  demands. 

Suburban  limited  service  through  city  streets. 

Interurban  and  limited  service. 

2.  Electric  railways  possess  certain  advantages  over  steam  roads, 

i.  e.,  speed,  frequency  of  service,  economy  of  operation,  and 
cleanliness. 

(f )  The  use  of  public  streets  and  highways  together  with  the 
monopoly  principle  gives  cause  for  regulation. 

LOCAL  REGULATION 

1.  Early  long-time  franchises  with  fare  regulation,  car  licenses, 
competitive  bidding,  excess  dividend  tax,  gross  and  net  earn- 
ings tax,  paving,  sprinkling,  free  transportation,  etc. 


166  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  167 

2.  Partnership  and  profit  sharing  plans  in  Philadelphia  and  Chi- 

cago, 1907. 

3.  Ownership  by  municipality  and  operation  through  lease  by  priv- 

ate company.  Boston  20-year  and  New  York  50-year  subway 
leases. 

4.  Cleveland  sliding  scale  of  rates  with  permanent  supervision, 

1910. 

5.  The   San    Francisco    (1913)    and    Seattle    (1914)    municipality 

owned  lines.  Grosser  Bill  in  Congress  to  acquire  electric 
street  railways  in  Washington,  1913. 

STATE  REGULATION 

1.  Early  state  statutes  defined  city  powers  in  granting  franchises. 

State  laws  and  constitutions  required  competitive  franchises, 
municipal  ownership  clauses,  and  popular  vote. 

2.  State  commission  regulation  of  rates,  services,  capitalization, 

and  construction,  1907-1914.  Wisconsin  indeterminate  per- 
mit and  local  service  regulation  features.  New  York  statute. 
Extent  of  state  regulation  in  1914. 

INTERSTATE  REGULATION 

1.  Regulation  of  interstate  railways  (urban,  suburban,  and  inter- 
urban)  was  first  exercised  by  the  Interstate  Commerce  Com- 
mission in  1908.  State  and  national  publicity  of  accounting. 

U.  S.  Census,  Rep.  on  Street  and  Electric  Rys.  1907, 
pp.  265-288,  1902,  Pt.  1,  pp.  126-148.  An.  Amer.  Acad., 
1911,  pp.  1-13,  14-30,  68-77.  Elec.  Ry.  Engineering, 
Harding,  Pt.  1,  Chap.  1.  Johnson  &  Huebner,  Vol.  2,  pp. 
231-54. 


QUESTIONS 

1.  What  effect  upon  housing  conditions  has  an  urban  rate 

varying  with  the  distance? 

2.  Under  the  profit  sharing  plan  of  regulation,  is  it  possible 

to  have  adequate  regulation  of  rates  and  service? 

3.  "With  increasing  urban  transportation  costs  due  to  wage 

increases,  rise  in  material  prices,  higher  interest  and 
improved  facilities,  which  cannot  be  offset  by  larger 
car  capacity,  economy  in  maintenance  and  operation, 
lower  production  cost  of  power,  etc.,  what  will  be  the 


168  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  169 

solution  with,  nq  increase  in  revenues  due  to  a  flat  ur- 
ban fare?  Is  it  increase  in  fares,  subsidization,  or 
public  ownership? 

4.  If  an  urban  area  has  excessively  profitable  transportation 

lines,  should  the  fare  be  lowered,  service  extended,  or 
the  single  fare  area  be  enlarged? 

5.  In  Wisconsin  all  interurban  lines  must  procure  a  state- 

ment from  each  abutting  property  owner  to  waive  all 
claims  for  damages,  otherwise  suit  may  be  brought. 
What  effect  may  this  have  upon  interurban  develop- 
ment? 

6.  "What  is  the  economic  significance  of  interurban  inter-line 

tickets  sold  at  present  in  Indiana,  Ohio,  and  Illinois? 


170  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  171 


CHAPTER  XIX 
SOME  CURRENT  RAILWAY  PROBLEMS 

(a)  Since,  in  the   United  States,  railways  constitute  a  pri- 
vately owned  mechanism  existing  solely  for  the  performance  of 
public   services,   the   fundamental   problems   obviously  concern 
the  definition  and  character  of  thd  service;  the  physical  attri- 
~bul< *  of  Hie  transportation  mechanism;  the  efficiency  of  railway 
operation  and  management;  the  compensation  of  railway  capital 
and  operatives;  and  the  manner  of  assessing  railway  charges. 
Otherwise  stated,  railway  problems  fall  into  three  categories — 

1.  Social  evolution  and  public  policy. 

2.  Technical  improvement  and  scientific  management. 

3.  Valuation  and  rates. 

(b)  Businesses  supplying  certain  goods  or  services  under  cer- 
tain conditions  tend  to  pass  from  the  sphere  of  private  enter- 
prise to  that  of  pxiblic  management  as  the  service  rendered  be- 
comes increasingly  necessary  to  public  welfare. 

The  determination  of  the  status  of  the  railway  business,  as 
regards  relative  public  and  private  "characteristics,  and  of  the 
degree  to  which  public  management  should  be  exercised  pre- 
sents the  following  subjects  of  controversy: 

1.  Supervisory-mandatory  commission  regulation  versus  judicial 

regulation. 

2.  National  regulation  versus  state  regulation. 

3.  Public  ownership  versus  private  ownership-. 

Ripley,.  pp.    627-638.    La  Salle,  pp.  106-138,    166.    La 
Salle,  pp.  94-105,  150-156,  229-232.     See  Poole's  Index. 

(c)  The  increasing  dependence  of  society  upon  the  railway 
service  requires  constant  additions  and  improvements  to  meet 


172  THE    UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  173 

the  imperative  needs  of  more  intensive  and  extensive  traffic — 
the  one  in  response  to  the  needs  of  dense  population  and  special- 
ized industry ;  the  other  in  aid  of  industrial  development  of  re- 
mote natural  resources. 

1.  The  terminal  problem  arises  from  the  fact  that  extensive  termi- 

nal facilities  and  railway  operation  in  cities  tend  to  promote 
several  forms  of  "nuisance". 

2.  The  funding  problem  is  uppermost  in  that  period  of  the  life  of 

a  railroad  when  its  operation  requires  multiple  trackage,  en- 
larged terminals,  and  increased  speed  and  safety  resulting  in 
increased  expenditures  without  commensurate  revenues. 

Johnson  &  Huebner,  Vol.  1,  pp.  77-94. 

(d)  The  labor  (wage)  problem  in  the  field  of  transportation 
is  .a  matter  of  unusual  concern  both  to  the  employer  and  the 
public. 

1.  Railway  labor  is  subject  to  private  contract,  but  it  is  employed 

in  the  public  service. 

2.  The  tactical  advantages  of  railway  labor  organizations  are  ex- 

ceptional. 

3.  The  public  necessity  of  the  railway  service  and  the  possible  im- 

potence of  railway  managers  to  control  their  operatives  sug- 
gest the  wisdom  of  official  regulation  of  matters  of  labor  and 
wages. 

Report  of  Board  of  Arbitration,  1913. 

(e)  The  question  of  more  intimate  administrative  supervision 
of  railways  has  been  forced  to  the  front  by  the  demonstrated 
incompetence  and  inefficiency  of  certain  railway  managements. 

1.  Publicity  and  official  sanction  afford  means  of  preventing  in- 

competence and  inefficiency. 
Official  inspection  and  continuous  supervision  will  go  further. 

2.  The  plea  of  the  railways  that  a  "relatively  small  proportion  of 

the  roads  have  been  mismanaged"  is  no  defense  against  offi- 
cial surveillance. 

La  Salle,  pp.  199-211.    Lit.  Dig.  47,  1138.     Harp.  Week. 
58,  14-15. 

(f)  The  chief  rate  problem  is  the  practical  application  of  the 
cost-of-the-service  theory. 

1.  Modern  methods  of  cost  accounting  and  statistics  are  adequate 
to  determine  average  unit  costs  of  significant  classes  of  the 


174  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  175 

railroad  service,  provided  that  the  "value  of  the  plant"  is 
known  and  the  "rate  of  return  on  the  investment"  is  speci- 
fied. 

2.  The  problem  of  valuation  involves  the  application  of  methods 

of  appraisal  based  upon  certain  economic  principles  of  valua- 
tion. 

The  historical  method  of  valuation  involves  a  compilation  of 
original  costs  and  subsequent  expenditures,  the  sum  of  which 
is  decreased  by  measured  depreciation  of  properties. 

The  hypothetical  method  of  valuation  involves  a  calculation  of 
the  probable  "costs  of  reproduction  new"  less  depreciation  to 
present  condition. 

The  commercial  method  of  valuation  involves  the  practice  of 
"capitalizing"  net  profits  and  anticipated  (speculative)  pe- 
cuniary conditions.  (Census  Bulletin  No.  21) 

3.  The  problem  of  gross  charges  involves:  first,  the  determination 

cf  the  interest  rate  which  will  attract  capital  on  the  open 
money  market  sufficient  in  amount  to  fund  necessary  rail- 
way enterprises;  second,  the  application  of  this  rate  to  the 
determined  valuation  of  existing  railway  property;  and 
third,  the  addition  of  approximate  expenses  of  operation  and 
maintenance  to  the  capital  charge. 

4.  The  problem  of  specific  rates  involves;   first,  the  allocation    of 

gross  expenses  among  significant  classes  of  the  service  on  the 
basis  of  approximate  average  unit  costs  within  the  class;  and 
second,  such  adjustment  of  special  rates  as  may  properly  be 
made  in  support  of  public  policy. 

Buell  case ;  Express  case ;  and  Milwaukee  Terminal  Dis- 
trict case  before  the  Wisconsin  Railroad  Commission — 
Index  of  Wisconsin  cases.  Whitten,  pp.  796—797. 

(g)   Some  concrete  problems  of  railway  economics  are: 

1.  The  regulative  treatment  of  the  "innocent  holder". 

(Report  of  Railway  Securities  Commission) 

2.  The  determination  of  proprietorship  interests  in  donated  rail- 

v.-ay  property  and  in  "social  value  increments".  (Whitten, 
pp.  160-166,  102-126) 

3.  The  dividend  status  of  re-invested  surplus  accumulated  out  of 

earnings.      (Whitten,  pp.  176-189) 

4.  The  justification  of  the  proposed  "blanket  increase"  in  freight 

rates.     (I.  C.  C.  Five  per  cent  case  1914) 

5.  The  readjustment  of  railway  mail  pay. 

(House  Doc.  1155,  63  Cong.  2nd) 

Note. — Students  should  examine  Poole's  Index  since  1910,  for  current  discus- 
sions of  railway  problems. 


176  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  177 


APPENDIX 


The  following  list  of  selected  readings  is  designed  to  cover,  in 
a  general  way,  the  subject  matter  of  class  lectures.  It  is  offered 
for  the  benefit  of  university  students  who  may  be  absent  from 
occasional  lectures  and  volunteer  non-resident  students  of  trans- 
portation. 

READING  COURSE 

CHAPTER  I.     THE  FUNCTIONS  OF  RAILWAYS 

1.  Annals  American  Academy  of  Political  and  Social  Science , 

Vol.  5,  p.  905. 

2.  Goodnow,  Municipal  Government,  Chap.  2. 

3.  Haines,  Railway  Corporations  as  Public  Servants,  Chaps.  1 

to  4. 

4.  King,  Regulation  of  Municipal  Utilities,  Chap.  1. 

5.  McPherson,  Railroad  Freight  Rates,  Chaps.  1  to  4. 

6.  Meyer,  Railway  Legislation  in  the  United  States,  Chap.  1. 

7.  Pratt,  Inland  Transportation  and  Communication  in  Eng- 

land, p.  385. 

8.  Taussig,  Principles  of  Economics,  Vol.  1,  p.  143. 

9.  McPherson,  The  Wordings  of  the  Railroads,  Chap.  1. 

CHAPTER  II.     THE  PUBLIC  NATURE  OF  THE  RAILWAY  BUSINESS 

1.  Beale  and  AYyman,  Railroad  Rate  Regulation,  Chaps.  1  and 

2. 

2.  Cleveland  and  Powell,  Railroad  Finance,  p.  153. 

3.  Hartley,  An  article  on  the  Constitutional  Position  of  Prop- 

erty in  the  United  States.     Independent,  Vol.  64,  p.  834, 

12 


178  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  179 

4.  King,  Regulation  of  Municipal  Utilities,  Chap.  1. 

5.  La  Salle  Extension  University:     Business  Administration, 

Transportation,  Chap.  1. 

6.  Munn  v.  Illinois,  94  U.  S.  113. 

7.  Peik  v.  Xorth  western  and  C.  B.  &  Q.  v.  loiva  in  94  U,  S. 

8.  Whitten,  Valuation  of  Public  Service  Corporations,  Chap.  1. 

9.  Yale  Review,  Vol.  16,  p.  361. 

10.  German  Alliance  Fire  Insurance  case.     34   S.  Ct.  612. 


CHAPTER  III.    FOREIGN  RAILWAY  SYSTEMS 

1.  Annual  Reports  of  the  English  Railway  and  Canal  Commis- 
sion. 

2.  Annual  Reports  of  the  Interstate  Commerce  Commission. 

3.  Acworth,  The  Railways  of  England. 

4.  Hadley,  Railroad  Transportation,  pp.  14,  146,  205. 

5.  Bruen,  The  Administration  of  State  Railways  in  Prussia- 

Hesse. 

6.  Johnson,  American  Railway  Transportation,  pp.  293,  et  seq. 

7.  Johnson  and  Huebner,  Enilr<m<1  Traffic  and  Rates,  Vol.  1, 

Chap.  1. 

8.  McPherson,  Transportation  in  Europe. 

9.  Merritt,  Federal  Regulation  of  Railway  Rates,  Chap.  1. 

10.  Monkswell,  The  Railways  of  Great  Britain. 

11.  Noyes,  American  Railroad  Rates,  pp.  181,  et  seq. 

12.  Ripley,  Railway  Problems,  pp.  774,  et  seq. 

13.  Raper,  Railway  Transportation. 

14.  Reports  to  English  Board  of  Trade:  Railways  in  Germany. 

1909. 

15.  Reports  to  English  Board  of  Trade:  Railways  in  Belgium, 

France  and  Italy. 

16.  Reports  to  English  Board  of  Trade:  Railways  in  Austria 

and  Hungary. 

17.  Senate  Misc.  Documents  No.  66,  Vol.  2,  1886-1887.     Simon 

Sterne,  Railway  Systems  of  Europe. 


180  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  181 


CHAPTERS  IV.   AND   V.     THE  DEVELOPMENT  AND   GROWTH   OF 
AMERICAN  RAILWAYS 

1.  Adams,  Railroads,  Their  Origin  and  Problems,  1878.  (Crit- 

icizes railroad  policies  in  70s) . 

2.  Bogart,  The  Economic  History  of  the  United  States.    1908. 

3.  Brown,  The  History  of  the  First  Loco-motives  in  America. 

1871. 

4.  Carter,  When  Railroads  were  New.    1909. 

5.  Cleveland  and  Powell,  Railroad  Promotion  and  Capitaliza- 

tion. 

6.  Dixon,  Traffic  History  of  the  Mississippi  River.    1909. 

7.  Fite,  Social  and  Economic  ^Conditions  in-  the  North  during 

the  Civil  TTar,  pp.  42-77. 

8.  Gephart,  Transportation  and  Industrial  Development  in  the 

Middle  \Vf.st,  Columbia  Studies,  Vol.  34.    1909. 

9.  Haney,  A  Congressional  History  of  Railroads  in  the  United 

States,  2  Vols. 

10.  Johnson,  Amn-iran  Railway  Transpartatio-n,  Chaps.  1  to  5. 

11.  Pearson,  An  American  Railroad  Builder:  John  H.  Forbes. 

1911. 

12.  Pangborn,  The  World  Railways.     1894. 

13.  Phillips.  The  History  of  Transportation  in  the  Eastern  Cot- 

ton Belt.     (Discusses  the  economic  causes  of  southern 
railway  construction ) . 

14.  Raper,  Railway  Transportation,  pp.  179-297. 

\    15.  Ripley.  Railroads:  Rates  and  Regulation,  Chap.  1. 

16.  Rmgwalt.  The  Development  of  Transportation  Systems  in 

thr.  Fnitfd  States. 
<-17.  Spearman,  The  Strategy  of  Great  Railroads. 

18.  Tanner,  A  Description  of  the  Canals  and  Railroads  of  the 

U.  8.  1840. 

19.  Sanhorn.  Congressional  Grants  of  Land  in  Aid  of  Railway 

Const  ruction. 

20.  Smaller,  History  of  the  Northern  Pacific. 

21.  The    American    Railway,    its    Construction,    Development, 

Managrmcnt.  and  Appliances,  1892,  pp.  100-148.    (Lo- 
comotives and  cars). 


182  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  183 

22.  The  Granger  Movement,  Cambridge  1913. 

23.  U.  S.  Census  (tenth)  History  of  Canals. 

24.  U.  S.  Reports  Internal  Commerce,  1876 — app.  p.  31  (through 

traffic).     1880 — p.  72   (relative  importance  of  cities). 
1881 — p.  179  and  1884,  p.  5  (statistical  data  on  canals). 

25.  White,  History  of  the  Union  Pacific. 

CHAPTER  VI.     RAILWAY  COMPETITION  AND  CO-OPERATION 

1.  Cleveland  and  Powell  Railroad  Finance,  pp.  154,  227,  277. 

2.  Cooley,  Popular  and  Legal  View  of  Pooling,  Railway  Re- 

view, 1887  or  Compendium  of  Transportation  Theories, 
ed.  C.  C.  McCain. 

3.  Clark,  Consolidation  of  Corporations.     (Legal). 

4.  Elliott,  Treatise  on  Law  of  Railroads.  (Legal). 

5.  Dixon,  Railroads  in   their  Corporate  Relations.     Quarterly 

Journeil  Economics,  Vol.  23,  p.  34. 

6.  Fink,  The  Railroad  Problem  and  its  Solution.     1882. 

7.  Hadley,  Railroad  T  rein  sport  at  ion,  Chap.  VI. 

8.  Hadley,   Railroad    Pools.     Quarterly    Journal    Economics, 

Vol.  4. 

9.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  1. 

Chaps.  XV,  XVI,'  XIX.    Vol.  2,  pp.  167,  237. 

10.  Johnson.  American  Railway  Transportation,  Chap.  15  to  19. 

11.  Knapp,    Some    Observations    of   Railroad    Pooling.      1896. 

Annals  American  Academy  Social  and  Political  Science, 
Vol.  8. 

12.  La  Salle  Extension    University,  Business    Administration, 

Transportation,  pp.  63,  223,  345,  351. 

13.  Langstroth  and  Stilz,  Railway  Co-operation.   1889.     Univer- 

sity of  Pennsylvania  Publications,  Series  in  Political 
Science  and  Public  Law,  Vol.  15. 

Probably  the  best,  and  certainly  the  most  exhaustive, 
study  of  railway  cooperation. 

14.  Morris,  Railroad  Ael  ministration,  p.  257. 

15.  Xewcomb.  Where  Competition  is  present  Discrimination  can^ 

not  be  absent.     Chicago  Conference  on  Trusts,  pp.  239- 
249. 

16.  Xewconib,  Railway  Economics,  pp.  120-142. 

17.  Xoyes,  Treatise  on  the  Law  of  Intercorporate  Relations. 


184  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  185 

18.  Ripley,  Trusts,  Pools,  and  Corporations.    (Illustrative  of  in- 

tercorporate processes) . 

19.  Robertson,  Combinations  among  Railroad  Companies.    1912. 

20.  Walker,  Railway  Associations.      Compendium  of  Transpor- 

tation Theories,  pp.  277-295. 

21.  Walker,  Western  Freight  Association,  Forum  Vol.  8. 

22.  The  student  should  familiarize  himself  with  the  following 

reports.  "Windom  Report  1874.  Sen.  Doc.  307  1st.  sess. 
43rd.  Cong.  Reagan  Report  1878.  House  Doc.  245. 
2nd.  sess.  45th.  Cong.  Cullom  Report  1886.  Sen.  Doc. 
46  1st  sess.  49th  Cong.  Hepburn  Report  1879.  N.  Y. 
Assembly. 

23.  54th  Cong.  2nd  sess.  Sen.  Doc.  115  (rate  demoralization  due 

to  rate  wars.) 

CHAPTER  VII.     RAILWAY  RATE  THEORIES 

1.  Allison,  Quarterly  Journal  Economics,  Vol.  27,  p.  27.     (Dis- 

cusses bases  of  valuation.) 

2.  Acworth,  The  Railways  and  the  Traders.    1891. 

3.  Buell  case  (BueU  v.  C.  M.  &  St.  P.)  Wis.  Railroad  Commis- 

sion Report,  Vol.  1.  (Application  of  cost-of-the-service 
theory). 

4.  Clark,  Standards  of  Reasonableness  in  Local  Discrimination, 

Columbia  Studies,  Vol.  37,  p.  1.  (An  excellent  discus- 
sion of  foreign  and  American  practices  in  the  use  of 
value-of-the-service  and  distance  tariffs). 

5.  Ely,   Outlines  of  Economics   (or  any   standard  text  for  a 

discussion  of  competitive  and  monopoly  value)  pp.  187, 
197. 

6.  Hammond,  Rate  Theories  of  the  Interstate  Commerce  Com- 

mission. (Showing  a  tendency  on  the  part  of  the  Com- 
mission to  adopt  the  cost-of-the-service  theory). 

7.  Hadley,  Railroad  Transportation,  Chap.  V. 

8.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  1. 

Chaps.  18-20.    Vol.  2,  Chap,  on  Passenger  Rates. 

9.  McPherson,  Railroad  Freight  Rates,  Chaps.  V,  et  seq. 

10.  Xoyes,  American  Railroad  Rates,  Chaps.  1  and  2. 

11.  Ripley,  Railroads:  Rates  and  Regulation,  Chaps.  2-5. 


186  THE    UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  187 

12.  Ripley,  Rate  Making  in  Practice.  Railway  Age  Gazette,  Vol. 

xlvi  May  7,  14,  21,  and  June  4,  11,  18.    1909. 

13.  Robinson.  Railway  Pawmjt  r  Rates.     Yale  Review,  Yol.  16, 

p.  355. 

14.  Robinson,  Railway  Freight  Rates,  Yale  Review,  Vol.  18,  p. 

121.     (In  advocacy  of  the  cost-of-the-service  theory). 
1">.   Sfligman.    Railway    Tariffs   and   the    Interstate    Commerce 
Law.     Political  Science  Quarterly,  Vol.  2. 

16.  Taussig,  A  Contribution  to  the  Theory    of  Railway  Rates. 

Quarterly  Journal  Economics,  July,  1891. 

17.  \Vhitten,  Valuation  of  Public  Service  Corporations.     (The 

most  complete  discussion  of  bases  of  valuation) . 


CHAPTER  VIII.     CLASSIFICATION  AND  TARIFF  STRUCTURES 

1.  American  Economic  Review,  March  1914,  p.  69.     (Discusses 

cost  of  service  in  classification). 

2.  Beale  and  "Wyman,  Railroad  Rate  Regulation,  Chap,  on  Class- 

ification.    (Decisions  involving  classification). 

3.  Dewsnup.  F  night  Classification. 

4.  Interstate  Commerce  Commission  Annual  Reports,  especially 

1897. 

5.  Hammond,  Rate  Theories  of  the  Interstate  Commerce  Com- 

mission, p.  42.  et  seq.  (Discusses  cost  of  service  in  classi- 
fication). 

6.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  1, 

Chap.  17. 

7.  McPherson.  Railroad  F night  Rates,  pp.  117,  138,  304. 

8.  Noyes,  American  Railroad  Rates,  p.  77. 

9.  Regulation  of  Railway  Rates,  Sen.  Doc.  243  1st  sess.  59th 

Cong.  p.  1230. 

10.  Ripley.  Railroads:  Rates  and  Regulation,  Chap.  9. 

11.  Strombeck.  Freight  Classification. 

12.  Official    Classification.      Southern    Classification.      Western 

Classification. 


THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  189 


CHAPTER  IX.     RATE  SYSTEMS  IN  THE  EAST  AND  SOUTH 

1.  Cases. 

Maximum  Freight  Rate  Case,  6  /.  C.  C.  Rep.  195.  (Ex- 
plains the  methods  of  making  rates  into  South  from 
East  and  West). 

Troy  case,  6  /.  C.  C.  Rep.  1.  (Discusses  basing  point 
system). 

Chattanooga  case,  10  7.  C.  C.  Rep.  111.  (Operation  and 
effects  of  basing  point  system). 

Danville  case,  8  I.  C.  C.  Rep.  409,  571.  (Virginia 
tariffs).  These  cases  are  discussed  in  Ripley,  E nil- 
way  Problems,  Revised  edition,  pp.  357-482. 

2.  Dixon,  The  Traffic  History  of  the  Mississippi  River.  National 

Waterways  Commission,  Doc.  11.     (The  influence  of  the 
Mississippi  River  on  rates) . 

3.  Fink,  Adjustment  of  Transportation  Rates  to  the  Seaboard. 

4.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  1. 

Chaps.  21,  22.     (Discusses  trunk-line  and  southern  sys- 
tems. ) 

5.  Report  of  N.  Y.  Special  Committee  011  Railroads,  1879,  p. 

3,000. 

6.  Report  on  Transportation  Interests  of  the  United  States  and 

'  Canada,  Sen.  Rep.  847,  1st  sess.  51st  Cong.  pp.  611-636. 

7.  Ripley,  Railroads:  Rates  and  Regulations,  pp.  354-379,  380- 

395.    Discusses  trunk-line  and  southern  systems. 

8.  Ripley,  The  Trunk  Line  Rate  Systems:  A  Distance  Tariff. 

Quar.  Jour.  Econ.  Vol.  20. 

9.  Thayer,  Transportation  of  the  Great  Lakes.     Annals  Amer- 

ican Academy  of  Social  and  Political  Science,  Vol.  31. 

CHAPTER  X.     WESTERN.  TRANSCONTINENTAL,  AND  IMPORT  AND 

EXPORT  RATES 

1.  Cases. 

Business  Men 's  League  of  St.  Louis  v.  A.  T.  &  S.  F.    10 

/.  C.  C.  Rep.  315. 

Spokane  case.  15  /.  C  C.  Prp.  376,  16  7.  C.  C.  Rep.  179, 
19  7.  ".('.  Iff  p.  162. 


190  THE    UNIVERSITY    OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  191 

Commercial  Club  etc.  v.  A.  T.  &  S.  F.  et  al.    19  I.  C.  C. 

R,L).  218. 

Reno  case.  19  /  C.  C.  Rep.  238. 
(These  cases  all  deal  with  transcontinental  rates) 
Import  Rates  case,  4  I.  C.  C.  Rep.  447. 
Export  Rates  case,  8  7.  C.  €.  Rep.  214. 
Pittsburg  Plate  Glass  Co.  v.  P.  C.  C.  &  St.  L.  13  7.  C. 

C.  R<p.  87. 
( These  cases  deal  with  export  and  import  rates) . 

2.  Import  Rates.     Sen.  Doc.     244  1st  sess.  59th  Cong. 

3.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  1,. 

Chaps.  23-25  and  appendix.     (Discusses  western  trans- 
continental and  export  and  import  rates.) 

4.  Mather,   How   the   States  Makt.    Interstate   Rates.     Annals 

Annriran    A<a<l<my    of   Social   and  Political   Science. 
(Western  Rates). 

5.  Ripley.  Railroads:  Rates  and  Regulation,  pp.  395-410,  600- 

626,    100-184.      (Discusses    western,    transcontinental 
and  import  and  export  rates). 

CHAPTER  XL     THE  RAILWAY  CORPORATION 

1.  Cleveland  and  Powell,  Railroad  Finn 

2.  Daggett.    Railroad    Reorganization.    (Excellent    illustrative 

material  with  generalizations). 

3.  Haney.  Business  Organization.  Chaps,  on  Promotion,  Under- 

writing, Marketing,  and  Internal  Organization. 

4.  Johnson,  American  Railway  Transportation.  Chaps.  6  and  7. 

5.  Machen,  Treatise  on  Modern  Law  of  Corporations.     Chap 

on  Promotion. 

6.  Meyer,  History  of  Xorth*  rn  Securities  Case. 

7.  Meyer,   Railway  Legislation   in   the    Vni^d   States.     Pt.   2,. 

Chap.  1  to  3.     (Discussion  of  charters  and  franchises). 

8.  Prentice,  Federal  Power  over  Carriers  and  Corporations. 

9.  Ripley.  Capitalization  of  Public  Service  Corporations. 

10.  Ripley,  Railroads:  Finance  and  Capitalization. 

11.  Report,  Committee  to  Investigate  the  Control  of  Money  and 

Credit.     (Inter-business  relations). 

12.  Report,    Interstate    Commerce    Commission   on    Intercorpo- 

rate Relationships  of  Railways.  1906. 


192  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  193 

13.  Report,  Steamship  Agreements  and  Affiliations.    House  Doc. 

63rd  Cong. 

14.  Report,  Railway  Securities  Commission. 

15.  Sakolski,  American  Railroad  Economics,  Chap.  3. 

16.  Wood,  Modern  Business  Corporations,  pp.  112,  137. 

17.  Meade,  Trust  Finance,  Chaps.  2  to  8  and"  12  to  18  (corporate 

methods). 

CHAPTER  XII.     PURPOSES  AND  METHODS  OP  REGULATION 

1.  Annual  Reports :  Proceedings  of  the  National  Association  of 

Railroad  Commissioners. 

2.  Annual  Reports:   State  Railroad    Commissions,    especially 

Wisconsin,  New  York,  Massachusetts,   Texas,   Illinois, 
and  Iowa. 

3.  Annals  American  Academy  of  Social  and  Political  Science, 

Vol.  5,  p.  909.     (Services  of  railroads). 

4.  Administrative  Supervision  of  Railways.   Quar.  Jour.  Econ. 

Vol.  23,  p.  364. 

5.  Beale  and  Wyman,  Railroad  Rate  Regulation,  iii,  iv,  Sec. 

1302-1310. 

6.  Clark,  Stats  Railroad  Commissions  and  How  They  may  ~be 

Made  Effective.    Pub.  American  Economic  Association, 
Vol.  6. 

7.  Dixon,  Statt  Railroad  Control.     (Discusses  state  and  federal 

control  and  opposes  centralization). 

8.  Dunbar,  Government  by  Injunction.     Amer.    Econ.    Assn. 

Pub.  Vol.  3. 

9.  Dunn,  American  Transportation  Question,  Chaps.  7  to  10. 

(Efficiency   and  public  service.     Government  regula- 
tion). 

10.  Hendrick,  Railway  Control  by  Commission,  Chaps.  8  and  9. 

11.  Johnson,  American  Railway  Transportation,  pp.  349^427. 

12.  King,  Municipal  Utilities,  Regulation  of.     Chap.  1.     (Pur- 

poses of  regulation). 

13.  La   Salle    Extension   University.    Business   Administration, 

Transportation. 

14.  Merritt,  Federal  Regulation  of  Railway  Rates,  pp.  8,  79-138. 

(Regulative  methods). 

13 


194  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY   TRANSPORTATION  195 

15.  Meyer,  Railway  Legislation  in  the  United  States,  Pt.  2,  Chap. 

4.   (Purposes  of  regulation). 

16.  Report:  The  Commerce  Court,  House  Rep.  472,  62nd  Cong. 

2nd  Sess. 

17.  Ripley,  Railroads:    Rates    and    Regulation,  484,    627-642. 

(Conflict  of  state  and  federal  authority). 

18.  Smalley,  Doctrine  of  Judicial  Control.     Ripley,  Railroad 

Problems,  p..  619. 

CHAPTER  XIII.     RAILWAY  REGULATION  IN  THE  UNITED  STATES 

PRIOR  TO  1906 

1.  Adams,  Railroads,  Their  Origin  and  Problems. 

2.  Chapter  of  Erie  (See  Ripley 's  Problems.    Discussion  of  spec- 

ulative methods). 

3.  Dos  Passes,  The  Interstate  Commerce  Act:  An  Analysis  of 

its  Provisions. 

•±.  Haney,  Congressw-nal  History  of  Railroads  in  the  United 
States.    2  Yols. 

5.  Hadley,  Workings  of  tJie  Interstate  Commerce  Act.     Quar. 

Jour.  Econ.  Vol.  2.    Railroad  Business  under  the  Inter- 
state Commerce  Law.    Quar.  Jour.  Econ.  Yol.  3,  p.  170. 

6.  Hudson,  Railways  and  the  Republic,  especially  pp.  41^6,. 

55-106,  251-286.     (Railroad  conditions  and  abuses). 
l>7.  Johnson,  American  Fail  wen/  Transportation,  pp.  349-385. 

8.  Martin,  History  of  the  Grange  Movement. 

9.  Peirce,  Digest  of  decision  of  the  Court  and  the  Interstate 

Commerce  Commission  (up  to  1908). 

10.  Painter,  Compilation  from  the  Congressional  Record. 

11.  Ripley,  Railroads:  Rates  and  Regulation,  pp.  441-499.  (Prob- 

ably the  best  brief  discussion  of  the  act  of  1887). 

12.  Cullom  Report,  49th  Cong.  1st  Sess.  Sen.  Rep.  46.     1886. 

13.  "Windom  Report,  Sen.  Rep.  307,  43rd  Cong.  1st  Sess.  1874. 

(Best  discussion  of  the  underlying  causes  of  regula- 
tion) 


196  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  197 

CHAPTER  XIV.     RAILWAY  REGULATION  SINCE  1906 
The  Act  of  1906 

1.  Beale  and  Wyman,  Railroad  Rate  Regulation,  pp.  1004  et  seq. 

(Decisions  on  various  points  in  the  law). 

2.  Collier's  Weekly,  May  4,  1907.  (Railroad  publicity  bureaus). 

3.  Dixon,  Tlie  Interstate  Commerce  Act  as  Amended.      Quar. 

Jour.  Vol.  21,  p.  22. 

4.  Digest  of  Hearings  before  Senate  Committee  on  Interstate 

Commerce  1905.    pp.  1-56.     (Railway  concentration  as 
a  cause  of  legislation). 

5.  Haines,  Restrictive  Legislation,  p.  265.     (Efforts  at  legisla- 

lation  between  1903  and  1906). 

6.  Meyer,  Railway  Legislation  in  the  United  States,  Chap.  01^ 

Cullom  Bill. 

7.  Merriam  and  Lust,  Digest  of  Decisions  of  the  Interstate  Com- 

merce Commission  since  1908. 

8.  Munsey's  Magazine,  March  1912.     (Pro-railroad  activity  in 

behalf  of  Act  of  1906). 

9.  Publicity  of  Accounts.     Quar.  Jour.  Econ.  Vol.  22,  364. 

10.  Report  of  Commissioner  of  Corporations  on  Transportation 

of  Petroleum,  1906.     (Rebating). 

11.  Ripley,  Railroads:  Rates  and  Regulation, pp.  499-556.     Also 

Chap.  6  on  discrimination,  which  has  valuable  refer- 
ences. 

12.  Smalley,  Rate  Control  under  the  Amended  Interstate  Com- 

merce Law.    Quar.  Jour.  Econ.  Vol.  24,  p.  292. 

13.  Tarbell,  History  of  the  Standard  Oil  Company. 

The  Act  of  1910,  and  subsequent  acts 

1.  Annual  Reports  of  the  Interstate  Commerce  Commission. 

2.  Dixon,  An  article  in  the  Quarterly  Journal  Economics,  Vol. 

23,  p.  593. 

3.  Mann-Elkins  Act,  American  Political  Science  Review,  Vol. 

4,  p.  537. 

4.  Ripley,  Railroads :  Rates  and  Regulations,  pp.  557-626,  638- 

640. 

5.  Report  of  the  Railway  Securities  Commission. 


19J8  THE   UNIVERSITY   OF  WISCONSIN 


(/ 

AMERICAN    RAILWAY    TRANSPORTATION  199 

6.  Review  of  Reviews,  Aug.  1913,  p.  208  contains  a  good  expo- 

sition of  the  physical  valuation  act  of  1910. 

7.  House  Rep.  472,  62  Cong.  2nd.     The  Commerce  Court. 

8.  The  Intermountain  Rate  cases.  Ripley,  Railroads :  Rates  and 

Regulation,  pp.  601-626.     In  the  foot  notes  are  valu- 
able references. 

9.  Reference  should  be  made  to  indices   of   current  leading 

magazines. 

10.  Annals,  American  Academy  of  Political  and  Social  Science, 

Sept.  1914. 

11.  Shreveport  Rate  Case  (34  S.  Ct.  833). 

CHAPTER  XV.     ORGANIZATION  OP  THE  FREIGHT  AND  PASSENGER 

SERVICE 

1.  Byers,  Economics  of  Railway  Operation. 

2.  Dewsnup,  Railway  Organization  and  Working. 

3.  Haines,  American  Railway  Management. 

4.  Hine,  Modern  Organization:  an  Exposition  of  the  Unit.- Sys- 

tem. 

5.  Johnson,  American  Railway  Transportation,  p.  184. 

6.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Chap.  4. 
/l.  Kruttschmitt,  Tine  Operating  Organization  of  the  Union  Pa- 

cific  and  the  Southern  Pacific,  Systems.    Railway  Age 
Gazette,  Vol.  xlvi.  p.  1113. 

8.  McPherson,  The  Working  of  the  Railroad. 

9.  Morris,  Railroad  Administration.     (Probably  the  best  gen- 

eral account). 

10.  Priestly,  Report  on  the  Organization  and  Working  of  Rail- 

ways in  America. 

11.  Ripley,  Railroads:  Finance  and  Capitalization. 

CHAPTER  XVI.     THE  MAIL,  PARCEL  POST,  AND  EXPRESS  SERVICE 
The  Mail  and  Parcel  Post  Services 

1.  Annual  Reports  of  the  Post  Office  Department. 

2.  Carr,  The  Railway  Mail  Service:  Its  Origin  and  Develop- 

ment. 


200  THE   UNIVERSITY   OF  WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  201 

3.  History  of  the  Railway  Mail  Service.     Executive  Doc.  40, 

48th  Cong.  2nd  Sess. 

4.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  2, 

pp.  324-349. 

5.  Newcomb,  The  Postal  Deficit.   (Taking  the  view  that  rail- 

roads are  not  paid  too  much). 

6.  Railway  Mail  Pay.     Hearings  before  House  Committee  on 

Post  Offices  and  Post  Roads. 

7.  Report  of  the  Postal  Commission.     House  Doc.  608,  59th 

Cong.  2nd  Sess. 

8.  Tunell,  Railway  Mail  Service:  A  Historical  Sketch. 

9.  Tunell,  Railway  Mail  Service.    (Discusses  railway  mail  pay, 

inclines  toward  a  cost  basis). 

10.  Journal  of  Political  Economy,  June,  1914.    Contains  a  good 

account  of  the  Parcel  Post  in  foreign  countries  and  the 
administrative  policy  in  America.    See  pp.  509  et  seq. 

11.  Parcel  Post  in  Foreign  Countries.    Prepared  under  the  di- 

rection of  Senator  Bourne,  Washington,  1912. 

12.  Parcel  Post  Hearings  before  Sub-committee  on  Parcel  Post 

of  Senate  Committee  on  Post  Offices  and  Post  Roads, 
1912,  5  vols. 

The  Express  Service 

1.  Alleged  Purchase  and  Sale  of  Commodities  ly  Express  Com- 

panies.    Sen.  Doc.  468,  60th  Cong.  1st  sess. 

2.  Stimson,  History  of  the  Express  Business.  1895.  (Very  good 

for  early  history). 

3.  The  present  situation  in  the  Express  business  may  best  be 

grasped  from  a  study  of  the  following  cases: 

In  re  Express,  24  7.  C.  C.  Reps.  385.     (Best  account 

of  present  practices.) 

Merchants  and  Manufacturers  Association  of  Mil- 
waukee v.  Wells  Fargo  et  al.  Wisconsin  Commission  No. 
R.  669,  1913. 

Boise  Commercial  Club  v.  Adams  et  al.  17  7.  C.  C. 
Reps.  115. 

Maricopa  County  Commercial  Club  v.  "Wells  Fargo 
et  al.  16  7.  C.  C.  Reps.  182. 

Ullman  v.  Adams  et  al.  14  7.  C.  C.  Reps.  340. 

Kindel  v.  Adams  et  al.  13  7.  C.  C.  Reps.  475. 


202  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  203 

4.  Express  Business  in  the  United  States.    Bureau  of  Census, 

Special  Reports,  1908. 

5.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  2, 

pp.  270  et  seq. 

6.  Official  Classification. 

CHAPTER  XVII.     THE  PULLMAN  SERVICE  AND  PRIVATE  CAR 

COMPANIES 

The  Pullman  Company 

1.  Annual  Reports  of  the  Pullman  Company. 

2.  Graser,  The  Pullman  Company  under  Federal  Law.    Rail- 

way World,  Vol.  1,  p.  781. 

3.  Loftus  v.  Pullman  et  al.  18  I.  C.  '€.  Reps.  135. 

4.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  2, 

pp.  96  et  seq. 

Private  Car  Companies 

1.  I.  C.  C.  Reps.  3-15,  261;  5-35;  7-60;  16-80;  17-22;  1810. 

2.  In  re  Transportation  of  Freight  by  Common  Carriers  in  cars 

not  owned  by  such  Common  Carriers.    I.  C.  C.  Hear- 
ings.   1904. 

3.  Midgely,  Private  Cars:  An  Inquiry  into  their  Growth,  De- 

velopment, and  Operation.    Railway  Age  Gazette,  Oct. 
10,  17,  Nov.  7,  21,  Dec.  19,  and  Jan.  16,  1903. 

4.  Per  Diem  Payments.      Railway  Age  Gazette,  Feb.  17,  1899 

and  Oct.  11,  1901. 

5.  Ringwalt,  Development  of  Transportation  Systems  in  the 

United  States.     1888. 

6.  Report  of  the  Joint  Special  Committee  to  Investigate  the 

Management  of  the  Vermont  Central.    1873.     (Abuses 
of  fast  freight  lines). 

7.  Reports.     Bureaus  of  Corporations: 

1905.  Beef  industry. 

1906.  Transportation  of  petroleum. 

8.  Theory  and  Practice  of  the  American  System  of  Through 

Fast  Freight  Lines,  as  illustrated  in  the  operation  of 
the  Empire  Line. 


204  THE   UNIVERSITY   OF   WISCONSIN 


AMERICAN    RAILWAY    TRANSPORTATION  205 

9.  Windoin  Report,  Sen.  Doc.  43rd  Cong.  1st  sess.  307. 

10.  Wilson,   History   of  the  Pennsylvania  Railroad   Company, 

vol.  2.   (Discussion  of  fast  freight  lines). 

11.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  1. 

Chaps.  12  and  13.     (A  good  brief  discussion  of  private 
cars  and  fast  freight  lines). 

12.  "Weld.   Private   Freight   Cars   and  the  American   Railway. 

Columbia  Studies  vol.  31.     (A  good  study  and  very 
comprehensive) . 

CHAPTER  XV11I.     ELECTRIC  RAILWAYS 

1.  Con  way,  Decreasing  Financial  Returns  upon  Urban  Street 

Railway  Property.    Annals  American  Academy,  Vol. 
37.  pp.  14-30. 

2.  Harding.  Ehctric  Railway  Engineering.    Pt.  1,  Chap.  1. 

3.  Fisher,  Economics  of  Electric  Railways. 

4.  Franchises,  Public  Regulation,  and  Public  Ownership.  U.  S. 

Census,  Report  on  Street  and  Electric  Railways,  1902. 
Chap.  9. 

5.  Interurban  Railways — Economic,' Financial  and  Social  Fea- 

tures.    U.  S.  Census  Report,  1902.    Street  and  Electric 
Railways,  pp.  265-288. 

6.  Cumrnings,   Possibilities  of  Freight  Traffic  on  Interurban 

Lines.      American   Academy    of  S  cial   and  Political 
Science,  Vol.  37,  pp.  68-77. 

7.  Arnold,  Urban  Transportation  Problems.    Annals  American 

Academy,  Vol.  37,  p-.  1-13. 

8.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,  Vol.  2, 

Chap.  36. 

CHAPTER  XIX.     SOME  CURRENT  RAILWAY  PROBLEMS 

1.  Civic  Federation  Model  Bill. 

2.  Report  of  Railway  Securities  Commission.     (These  reports 

discuss  control  of  public  service  corporation  securities). 

3.  Dunn,  S.  0.,  Some  Current  Railway  Problems. 

4.  Dunn,  S.  0.,  Government  Ownership  of  Railways. 

5.  Johnson  and  Huebner,  Railroad  Traffic  and  Rates,   Vol.  1, 

Chap.  5.     (Discusses  terminal  problems). 


206  THE    UNIVERSITY    OF   WISCONSIN 


\ 


AMERICAN    RAILWAY    TRANSPORTATION  207 

6.  Report  of  Board  of  Arbitration,  1913. 

(Discusses  the  labor  problem). 

7.  Report  of  the  Pujo   Committee.    (Intercorporate  relations 

of  railways  and  banks). 

8.  Ripley,  Railroads:  Rates  and  Regulation.     Chap.  20.  (State 

versus  Federal  control,  with  valuable  footnote  refer- 
ences). 

9.  Senate  Committee  on     Valuation.     Sen     Rep.  1290,  62nd. 

Cong.  3rd. 

10.  House  Doc.  1155,  63rd    Cong.  2nd  Sess.     (The   problem  of 

railway  mail  pay) . 

11.  Whitten,  Valuation  of  Public  Service  Corporations,  pp.  102- 

126,   160-166,   176-189.     (Donated  land,   social  value 
increments,  and  invested  surpluses). 

12.  The  5  Per  Cent  Rate  Cases,  I.  C.  C.  1914  No.  5860. 

13.  The  Minnesota  Rate  case.     (See  Pol.  Sci.  Quar.,  March  1914, 

P.  57). 

14.  Moulton  H.  G.,  Waterways  versus  Railivays. 


208  THE  UNIVERSITY  OF  WISCONSIN 


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